- The National Assembly’s Finance and National Planning Committee wants to review the Pay as You Earn (PAYE) tax bands
- Kenyan Members of Parliament (MPs) want to lower the tax burden on low and high-income workers in the Finance Bill 2026
- Molo MP Kuria Kimani reiterated that the top tax rate should be dropped to align with the corporate tax
Japhet Ruto, a journalist at TUKO.co.ke, brings more than eight years of experience in finance, business, and technology, offering deep insights on economic trends in Kenya and globally.
President William Ruto’s administration is seeking to raise the threshold of tax-free income from the current KSh 24,000.
Source: Facebook
The National Assembly’s Finance and National Planning Committee intends to evaluate the current five tax bands in the 2026 Finance Bill.
Lawmakers aim to lessen the burden on high and low-income workers to support the formal sector.
Why MPs want to review tax rates
Business Daily reported that the committee, which plays a crucial role in the composition of the Finance Bill, seeks to lower the top income tax rate from the current 35% and raise the monthly pay that is subject to taxes.
Income taxes are currently paid at a rate of 32.5% for those making over KSh 500,000 per month and at a high rate of 35% for those earning over KSh 800,000.
“The tax-free threshold of KSh 24,000 is low and can be raised to accommodate a wider range of beneficiaries; therefore, I believe the new PAYE (pay as you earn bands) will reflect the new reality. Everyone agrees that reviewing the PAYE bands is crucial,” the committee’s chair Kuria Kimani explained.
The Molo Member of Parliament (MP) reiterated that the top tax rate should be dropped below the 35% threshold to align it with the corporate tax.
“If you lower the corporate tax rate, you also need to lower the upper PAYE band because an individual prefers to be paid as a company rather than an employee,” he added.
Source: Facebook
What did the World Bank recommend?
The drive to cut the top tax rates comes even as the World Bank urges Kenya to raise the highest income tax rate to 38% for individuals making over KSh 800,000.
The multilateral lender suggested that the tax rate for workers making between KSh 24,000 and KSh 32,333 should be lowered from the current 25% to 15%.
Employees’ purchasing power and standard of living were weakened for the fifth consecutive year as salary increases lagged behind inflation or cost-of-living measures.
Due to extra taxes and levies, such as the contentious healthcare insurance levy and the housing tax, workers’ disposable income has decreased even further.
Will Kenyans benefit?
People with low and moderate incomes would gain if the National Treasury implemented the World Bank’s recommendations.
A Kenyan making KSh 50,000 would receive KSh 39,208.30 in take-home pay, an increase of KSh 179.15.
Workers earning KSh 100,000 would receive a raise of KSh 3,788.15.
Low-income individuals have been disproportionately impacted by the disparity between before-tax and after-tax incomes, according to the Bretton Woods institution.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
