Mbadi Reveals When Kenyans Earning Below Ksh 32,333 Will Stop Paying PAYE Tax

Treasury Cabinet Secretary John Mbadi has revealed that Kenyans earning up to Ksh 32,333 per month could stop paying Pay As You Earn (PAYE) tax from January 2027, provided Parliament approves the proposed changes before the end of the year.

Mbadi said the National Treasury was preparing legislative proposals to implement the tax exemption announced by President William Ruto during the Mashujaa Day celebrations in Eldoret.

Speaking during an interview on Hot 96’s Checkmate on Sunday, October 25, Mbadi explained that the government intended to submit the proposals to Parliament after consultations with the Attorney General and other relevant parties.

He expressed confidence that lawmakers would approve the changes before going on recess, allowing the new tax rates to take effect in January.

The CS said the proposal would raise the monthly income threshold subject to zero PAYE from the current Ksh 24,000 to Ksh 32,333.

Under the existing arrangement, workers earning Ksh 24,000 and below are exempt from PAYE, while income above that threshold is subject to the applicable tax rates.

Mbadi said the proposed changes would provide additional relief to low-income earners struggling with household expenses.

He estimated that workers earning Ksh 32,333 monthly would receive an additional Ksh 2,083 in take-home pay under the new arrangement.

The Treasury CS disclosed that approximately 362,846 additional Kenyans in formal employment would qualify for the expanded zero-tax threshold.

He noted that the country had approximately 3.468 million formally employed people, including 1.329 million who were already exempt from PAYE under the existing threshold.

Mbadi clarified that the proposal would not mean every worker earning more than Ksh 32,333 would be excluded from the benefits.

According to him, employees earning higher salaries would also benefit because the expanded tax-free band would reduce the portion of their income subject to taxation.

The proposed changes are expected to cost the government approximately Ksh 34 billion annually, with an estimated Ksh 17 billion required for the remaining six months of the current financial year.

Mbadi said the government expects ongoing tax administration reforms and improved revenue collection to help offset the cost.

He added that the government had taken time to consult stakeholders before settling on the Ksh 32,333 threshold, following earlier discussions around a lower limit of Ksh 30,000.

The proposal must still pass through the legislative process before workers can begin benefiting from the new PAYE arrangement.

SOURCE: Watch interview from 00:55 to 6:20.

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