The government has introduced changes to income tax rules that will exempt workers earning less than Sh30,000 per month from paying Pay-As-You-Earn (PAYE) tax, a move aimed at easing the financial strain on low-income earners. The proposed tweaks are part of broader tax reforms led by the Cabinet Secretary for the National Treasury and Economic Planning, John Mbadi, and will be included in the upcoming Finance Bill once approved by Parliament.
Under the revised plan, employees whose monthly salaries fall below the Sh30,000 threshold will pay no income tax, effectively increasing their take-home pay. The proposals also include adjustments for those earning slightly above this bracket: workers with monthly earnings between Sh30,000 and Sh50,000 will benefit from a reduced PAYE rate of 5 per cent, down from the standard rate currently applied in that income band.
Treasury officials estimate that about 1.5 million out of roughly 3.65 million salaried Kenyans will benefit directly from the tax relief. The relief is designed to put more money into the pockets of low-wage earners, who often struggle with essential household expenses such as food, rent, school fees and healthcare.
In explaining the rationale behind the reforms, CS Mbadi emphasised the need for a tax system that reflects the economic realities of ordinary workers and supports their financial resilience. By relieving lower-income employees of the PAYE tax burden, the government hopes to improve disposable income, spur consumer spending and boost economic activity at the grassroots level.
Supporters of the proposal say the tax relief could have significant social and economic benefits. With more money available for daily needs, households may be less reliant on debt or informal borrowing, and low-income workers could experience improved living standards. The reduction in tax burden is also expected to send positive signals to the labour market, potentially enhancing morale and productivity among employees.
While the move has been welcomed by labour groups and civil society advocates, some economists caution that reducing PAYE revenue may impact government finances if not matched by broader reforms or enhancements in other revenue streams. They note that while tax relief is important, it must be balanced with the need to fund essential public services such as health, education and infrastructure.
The PAYE changes will take effect once Parliament finalises and enacts the Finance Bill. Employers will then be required to update payroll systems to reflect the new tax thresholds and rates, meaning that affected workers should see the impact in their net salaries following implementation.
As the tax reform process continues, the discussion around PAYE relief highlights ongoing efforts to adjust Kenya’s tax framework to be more equitable and responsive to citizen needs, particularly for those in lower income brackets.
Image by The Star
