Kenyans Earning Above KSh 50,000 Face Higher Taxes as Ruto Government Unveils New PAYE Plan

Thousands of Kenyan workers earning above KSh 50,000 monthly could face increased income tax deductions under new government proposals aimed at providing relief to low-income earners.

The proposed changes, announced by National Treasury Cabinet Secretary John Mbadi, seek to raise the monthly income threshold for Pay As You Earn tax from KSh 24,000 to KSh 32,333.

According to the Treasury, the plan would allow more workers to retain their earnings while shifting a greater tax burden to employees receiving higher salaries.

The proposal is expected to benefit approximately 362,846 additional formal-sector workers, increasing the number of employees exempt from income tax from 1.32 million to about 1.69 million.

Under the proposed arrangement, workers earning up to KSh 32,333 monthly would not pay PAYE.

However, the government intends to remove the existing KSh 2,400 monthly personal relief as part of the changes.

Employees earning between KSh 32,334 and KSh 50,000 could also benefit from reduced income tax deductions, with the Treasury estimating savings of up to KSh 596 monthly.

However, workers earning above KSh 50,000 are expected to experience higher tax deductions under the proposed restructuring.

Treasury estimates indicate that an employee earning KSh 60,000 monthly could pay an additional KSh 473 in income tax.

Those earning KSh 100,000 could face an increase of approximately KSh 892, while employees receiving KSh 200,000 monthly could pay an additional KSh 3,867.

The proposed changes are therefore likely to generate mixed reactions among Kenyan workers, particularly middle-income earners already dealing with rising living expenses and statutory deductions.

Mbadi said the government intends to introduce a zero-rate PAYE threshold to ensure workers earning lower salaries retain more of their income.

The Treasury plans to present the proposals to Parliament for consideration, meaning the changes are not yet confirmed as law.

The current income tax structure includes a 10% rate on monthly taxable income up to KSh 24,000, effectively offset by the existing personal relief.

Higher income bands attract rates of 25%, 30%, 32.5% and 35%, depending on earnings.

The last major changes to the upper income tax rates were introduced through the Finance Act 2023.

The proposed tax adjustments come amid continued concerns over the cost of living, household purchasing power and multiple deductions affecting employees’ payslips.

The Kenya Bankers Association has previously estimated that workers’ purchasing power has declined by as much as 12% over five years, partly because of taxation, statutory deductions and rising living costs.

If approved, the proposed reforms would offer relief to lower-paid employees while requiring higher earners to contribute more in income tax.

The final impact will depend on the legislation presented to Parliament and the eventual implementation of the proposed changes.

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