Kenya Proposed Tax Reform to Spare Low Earners from Income Tax

2026-10-23 region

Nairobi, 23 October 2026
Kenya’s proposed tax reforms raise the monthly income tax exemption threshold to 32,333 Shillings, freeing over 362,000 low earners from payroll tax while higher earners offset the revenue gap.

Elevating the Untaxed Income Ceiling

In a major policy announcement delivered on 22 October 2026, National Treasury Cabinet Secretary John Mbadi unveiled comprehensive proposals to revise Kenya’s income tax bands [1]. Under the new framework, the monthly threshold for untaxed income will rise from KSh 24,000 to KSh 32,333, representing a threshold increase of 34.721% [1][2]. To facilitate this expansion of tax-free earnings, the government plans to eliminate the current monthly personal tax relief of KSh 2,400 that was previously granted to all salaried employees [1][2].

Impact on Formal Sector Workers

The proposed tax adjustments are expected to exempt an additional 362,846 formal sector employees from Pay As You Earn (PAYE) obligations [1][3][6]. Consequently, the number of formal workers required to pay payroll taxes will decrease from 2.14 million to 1.77 million, leaving 1.77 million taxable workers out of the country’s total formal workforce of 3,468,997 [1]. While workers earning between KSh 32,334 and KSh 50,000 will enjoy modest monthly tax reductions of up to KSh 596, middle- and high-income earners face higher tax liabilities [6]. For example, individuals earning KSh 60,000 will pay an additional KSh 473 per month, whereas those earning KSh 100,000 and KSh 200,000 will see their monthly tax bills rise by KSh 892 and KSh 3,867 respectively [6].

Legislative Timeline and Broad Reform Measures

Treasury CS John Mbadi confirmed that no structural changes will be applied to tax bands above KSh 32,333, ensuring that the first KSh 32,333 of income remains tax-free for all salaried staff across the nation [5]. Legislative proposals detailing these statutory changes are scheduled to be formally introduced in Parliament during the week starting 26 October 2026 [5]. Alongside payroll tax restructuring, the National Treasury intends to introduce complementary fiscal measures, including the abolition of stamp duty on land transactions valued below KSh 1 million [5].

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taxation policy income threshold