Government Unveils New PAYE Plan as High-Income Earners Face More Taxes

Kenyans earning more than KSh 50,000 per month could face higher income tax deductions under new government proposals. The plan seeks to increase the number of low-income workers who pay no Pay As You Earn (PAYE) tax. Treasury Cabinet Secretary John Mbadi confirmed the proposed changes on Thursday, October 23, 2026.Under the plan, workers earning KSh 32,333 or less per month would be exempt from PAYE. The government intends to remove the current monthly personal tax relief of KSh 2,400 and raise the tax-free income threshold. The changes were first announced by President William Ruto during Mashujaa Day celebrations in Eldoret on October 20.

The proposal is expected to benefit low-income earners by increasing their take-home pay. According to the reported figures, workers earning exactly KSh 32,333 could gain about KSh 2,083 per month. Those earning between KSh 32,334 and KSh 50,000 could also enjoy modest tax reductions of up to KSh 596 per month.

However, workers earning above KSh 50,000 could pay more tax because the personal relief would be removed. For example, an employee earning KSh 60,000 per month could pay an additional KSh 473 in monthly taxes, while someone earning KSh 100,000 could pay KSh 892 more. Those earning KSh 200,000 could face an increase of about KSh 3,867 per month.

The government estimates that the changes would exempt an additional 362,846 workers from PAYE. This would increase the share of formally employed workers who pay no income tax from about 38% to nearly 49%. Treasury Cabinet Secretary John Mbadi said the proposal was intended to ease the tax burden on lower-income earners.

The bill to implement the proposed changes is expected to be presented to Parliament next week. Until the legislation is passed and officially published, employers must continue applying the existing PAYE rules.

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