Mbadi Reveals How New PAYE Rules Could Change Workers’ Take-Home Salarie

National Treasury Cabinet Secretary John Mbadi has announced that an additional 362,846 Kenyans in formal employment could be exempted from Pay As You Earn (PAYE) income tax under a government proposal to raise the monthly tax-free income threshold to KSh32,333.

The proposed changes are intended to ease the financial pressure on lower-income workers by allowing them to retain more of their salaries for essential expenses, including food, rent, transport, and school fees.

Under the current tax system, employees receive personal tax relief of KSh2,400 per month. The government now proposes to scrap this relief and instead apply a zero percent tax rate to monthly employment income of up to KSh32,333. The proposal would require changes to the law before it can take effect. Mbadi said the adjustment would increase the number of formal-sector employees exempt from PAYE from approximately 1.33 million to about 1.69 million.

According to Treasury estimates, employees earning between KSh32,334 and KSh50,000 could benefit from a reduction in their monthly tax liability of up to KSh596. A worker earning KSh32,333 could retain approximately KSh2,083 more each month under the proposed arrangement.

However, the changes would not benefit all workers equally. Treasury estimates indicate that employees earning more than KSh50,000 could face higher PAYE deductions because the existing personal relief would be removed while the higher tax bands remain unchanged.

For instance, an employee earning KSh60,000 could pay approximately KSh473 more in monthly income tax, while someone earning KSh100,000 could pay an additional KSh892. A worker earning KSh200,000 could face an increase of about KSh3,867 per month.

The proposal follows President William Ruto’s announcement during the 2026 Mashujaa Day celebrations in Eldoret that the government intended to increase the tax-free threshold.

Mbadi has indicated that the Treasury would present a tax amendment bill to Parliament for consideration. Until the necessary legislation is passed and implemented, employers must continue deducting PAYE under the existing rules.

The proposal has sparked debate about how to balance relief for lower-paid workers with the government’s revenue needs and the tax burden facing middle- and higher-income earners.

https://x.com/TheStarKenya/status/2114284314573549849?s=20

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