KENYA · ECONOMY
Key Facts
- —What is happening Kenya’s Treasury plans to ask Parliament to tax monthly pay of up to Sh32,333 (about US$249) at 0%, an idea President William Ruto announced on Tuesday 20 October 2026.
- —Why it matters Workers paid up to US$249 a month would owe no income tax. That lifts take-home pay but cuts state revenue, at a cost not yet published.
- —The numbers The tax-free limit would rise from Sh24,000 (about US$185) to Sh32,333 (about US$249), and a worker at the limit would keep Sh2,083 (about US$16) a month.
- —Who is who John Mbadi is Kenya’s Treasury Cabinet Secretary, the finance minister, and Kuria Kimani chairs the National Assembly committee on finance and planning, which examines tax Bills.
- —What to watch The Treasury says the Bill reaches Parliament in the week of Monday 26 October, and MPs must pass it before any change takes effect.
- —What it means for you US firms with staff in Kenya would see payroll withholding change if the Bill passes, but no start date exists yet, so no payroll change is due.
Kenya plans to tax monthly pay of up to US$249 at zero. The plan is a proposal, and Parliament has not yet voted on it.
Kenya plans tax-free pay for workers who earn up to Sh32,333 (about US$249) a month. Treasury Cabinet Secretary John Mbadi gave the details on Thursday 22 October 2026.
President William Ruto first announced the idea on Tuesday 20 October at the Mashujaa Day celebrations in Eldoret. Mashujaa Day is Kenya’s national holiday honouring its heroes.
Business Daily, a Nairobi paper, headlined the plan as tax-free pay for 1.7 million workers, a figure its text leaves unexplained. This report converts shillings at about 130 per US$, the rate of 24 October 2026.
What the Plan Would Change
Today an employee pays 10% on the first Sh24,000 (about US$185) of monthly pay and 25% on the next Sh8,333 (about US$64). The Kenya Revenue Authority, the national tax collector, publishes these bands on its website.
A personal relief of Sh2,400 (about US$18) a month is then deducted from the tax bill. At Sh32,333 (about US$249) that leaves Sh2,083 (about US$16) of tax a month.
Under the plan that worker would pay nothing, and the Sh2,400 (about US$18) relief would be scrapped. The 25%, 30%, 32.5% and 35% rates for higher pay would stay, according to Capital FM and Pulse Kenya.
Who Gets Tax-Free Pay Under the Plan
Business Daily says an extra 362,846 formal-sector workers would be exempted from income tax. Pulse Kenya gives the same figure from Mbadi’s briefing.
The 1.7 million figure appears only in that headline, and no official source gives it. The split between those already exempt and those newly exempt was not published.
Business Daily reports that workers earning more than Sh50,000 (about US$385) a month would pay more than now. Kenyans.co.ke warns that thousands of employees could pay more once the Sh2,400 (about US$18) relief goes.
The Treasury has not released the new band widths, so individual winners and losers cannot be calculated. Pulse Kenya reports that the government has settled the lower band and left other bands for later discussion.
Proposal Versus Law
None of these changes is law. They need a Bill, MPs’ votes and the President’s signature, and no Bill text was found online on Saturday 24 October 2026.
Current law still applies: the 10% and 25% bands and the Sh2,400 (about US$18) relief date from the Finance Act 2023. Employers keep withholding tax on that basis until Parliament decides.
The same package proposes dropping stamp duty on land deals worth Sh1 million (about US$7,700) or less. It also proposes removing the 25% import duty on mobile phones.
Why the Plan Is Coming Now
Ruto said the aim is to leave low-income workers with more money for food and transport. Mbadi called the review the first of several measures to lift household incomes, Citizen Digital reports.
PAYE, short for Pay As You Earn, is the income tax that employers deduct from each salary. Mbadi acknowledged that health and housing deductions have already cut take-home pay, according to Pulse Kenya.
Capital FM says lawmakers will weigh the change before the 2027/28 budget, drawn up ahead of the August 2027 general election. The Standard cites annual inflation of 6.8% in September 2026.
In Plain English
A zero rate means no income tax is withheld on that slice of pay. Personal relief is a fixed credit that cuts every worker’s tax bill by the same amount.
The Treasury is Kenya’s finance ministry, led by Mbadi. The National Assembly’s finance and planning committee, chaired by Kuria Kimani, reviews tax Bills before MPs vote.
What It Means for US Readers
Employers withhold PAYE from every salary, so US companies with Kenyan staff would have to update payroll settings if the Bill passes. No start date has been named, so nothing changes yet.
For investors, a wider tax-free band means less income tax collected by Nairobi. The Treasury has not published the lost-revenue figure, which bond and equity analysts will want to see.
What Is Not Known
The Bill’s name, text and start date have not been published, and the revised band widths are missing. The cost in lost revenue has not been stated.
The 1.7 million in Business Daily’s headline is unexplained, and the Sh50,000 (about US$385) warning comes from Business Daily alone. Treasury examples of winners and losers were reported unclearly, so they are left out.
What Comes Next
Mbadi says the Treasury will table the Bill in the week of Monday 26 October 2026. The finance and planning committee would then examine it before MPs debate and vote.
Passage would not change payslips at once, because the start date is still open. Rejection or amendment by MPs would also change the numbers above.
Frequently Asked Questions
Is Kenya’s tax-free pay plan law?
No. It is a proposal that needs a Bill, a vote in Parliament and presidential assent. Current tax bands and the Sh2,400 (about US$18) monthly relief still apply.
Who would pay no income tax?
Workers earning Sh32,333 (about US$249) a month or less would be taxed at 0%. Business Daily says an extra 362,846 formal-sector workers would be exempted; Pulse Kenya gives the same figure.
Would anyone pay more?
Business Daily reports that people earning above Sh50,000 (about US$385) a month would pay more. The Treasury has not released the new band widths, so the effect on each salary is unconfirmed.
When would the change start?
No start date has been given. The Treasury says it will table the Bill in the week of Monday 26 October 2026, and MPs must then pass it.
What does it mean for US companies in Kenya?
US employers would need to change payroll withholding if the Bill passes. They should wait for the final text and start date before adjusting systems.
Sources: Kenya Revenue Authority, PAYE rates; Capital FM; Kenyans.co.ke; Pulse Kenya; Citizen Digital; Citizen Digital, Mashujaa Day measures; The Standard; Business Daily (all accessed 24 October 2026).
This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief
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