Kenya Proposes Complete Tax Exemption for Workers Earning Below 30,000 Shillings Monthly
Nairobi, 4 February 2026
President William Ruto announces groundbreaking tax relief that would exempt 1.5 million Kenyans earning below KSh 30,000 from paying income tax entirely. The proposal also reduces tax rates from 30% to 25% for those earning up to KSh 50,000 monthly, benefiting over 3.5 million salaried workers total. Treasury Cabinet Secretary John Mbadi will present the Tax Laws Amendment Bill to Parliament next week, marking a significant shift from the current system where workers earning as little as KSh 24,000 face taxation. The reforms aim to increase household purchasing power and stimulate economic demand amid persistent cost-of-living pressures affecting ordinary Kenyans.
Timeline of Tax Reform Announcements
The tax reform proposal gained momentum on Sunday, 1 February 2026, when Treasury Cabinet Secretary John Mbadi first announced that Kenyans earning a monthly income of KSh 30,000 and below would be exempt from Pay As You Earn (PAYE) tax [1]. Speaking in Meru on Monday, Mbadi reinforced this commitment, stating that the Ministry would present the Tax Laws Amendment Bill before Parliament for approval ahead of the Finance Bill 2026 [2]. On Wednesday, 4 February 2026, President William Ruto publicly defended the proposal, emphasising that “any Kenyan who earns less than 30,000 shillings will not pay any taxes” [3][4]. The President confirmed his administration would forward the proposed tax changes to Parliament for consideration and approval [4].
Scale of Impact and Beneficiaries
The proposed reforms would significantly impact Kenya’s workforce, with approximately 1.5 million Kenyans earning below KSh 30,000 expected to benefit from complete PAYE exemption [1][2][3]. According to the National Exchequer, about 3,650,165 Kenyans are salaried, with 1.5 million earning KSh 30,000 and below [2]. The broader tax relief measures would benefit over 3.5 million salaried Kenyans in total [1], with more than 1.7 million workers earning below KSh 50,000 projected to benefit from lower tax liabilities [1]. Treasury estimates indicate that an additional 500,000 workers would see reduced tax burdens through the rate reduction for those earning between KSh 30,001 and KSh 50,000 [3][4].
Current Tax Structure and Proposed Changes
Under the existing system, PAYE tax begins at zero for the first KSh 24,000, then applies 25% on the next KSh 8,333, and 30% on the next KSh 467,667 [1]. Individuals earning over KSh 500,000 per month currently pay 32.5%, rising to 35% for those earning above KSh 800,000 [1]. The proposed changes would raise the tax-free threshold from KSh 24,000 to KSh 30,000, whilst reducing the tax rate for earnings between KSh 30,001 and KSh 50,000 from 30% to 25% [1][2][4]. Additionally, the top tax rate would be capped at 30%, down from the current range of 32.5% to 35% [1].
Financial Impact on Workers
The tax reforms promise substantial savings for affected workers. A worker earning KSh 50,000 would save KSh 2,500 monthly or KSh 30,000 annually under the proposed rate reduction [3]. More broadly, if implemented, Kenyans earning below KSh 50,000 could see income tax reliefs ranging between KSh 731 and KSh 2,127 [1]. To illustrate the current burden, a worker earning KSh 50,000 currently faces approximately KSh 3,000 in NSSF pension contributions, KSh 1,375 in SHA levy (2.75%), and KSh 750 in Housing Levy (1.5%) [4]. These deductions total approximately KSh 5,125 before PAYE applies, leaving a taxable income of about KSh 44,875, with current PAYE obligations of about KSh 5,800 monthly [4].
Economic Rationale and Next Steps
The reforms reflect broader economic pressures, with Treasury Cabinet Secretary Mbadi stating the measures aim “to put some money in your pockets so that you can spur demand in the economy” [3]. The Kenya Bankers Association had previously recommended exempting income below KSh 30,000 from PAYE, with CEO Raimond Molenje noting that “the purchasing power of salaried Kenyans has fallen significantly in recent years” [1]. President Ruto explained that the tax cuts are anchored on “positive fiscal outcomes and sound financial decisions implemented since his administration took office in 2022” [4]. The proposals are currently under public consultation and will be debated in Parliament after Mbadi tables the Tax Laws Amendment Bill [1][2], though the specific parliamentary timetable remains to be confirmed.