President William Ruto has announced that Kenyans earning salaries of up to Ksh50,000 will benefit from tax cuts, with the applicable rate set to be reduced from 30 per cent to 25 per cent under proposed tax changes by his administration.
Speaking during a meeting with UDA aspirants at State House, Nairobi, on Wednesday, the President said the recommendations would be forwarded to Parliament for consideration and approval.
The proposals will run alongside a separate amendment in which the government plans to exclude Kenyans earning below Ksh30,000 from paying income tax altogether.
According to the Head of State, the changes are anchored on what he described as positive fiscal outcomes and financial decisions implemented since his administration took office in 2022.
A graphic showing taxes and the Kenyan flag in the background.
“We are saying any Kenyan who earns upto Ksh50,000, we are reducing their taxes from 30 to 25 per cent. 1.5 million working Kenyans will not pay taxes,” Ruto said.
“We have begun the process of bringing down taxation. We will be taking a proposal that any Kenyan paying Ksh30,000 coming down will not be paying taxes again.”
Under the current tax regime, a person earning Ksh50,000 falls partly into the 30 per cent tax band. But in practice, their payslip includes several mandatory deductions before and after tax, including NSSF pension contributions, the 2.75 per cent SHA levy and the 1.5 per cent Housing Levy.
Using current statutory rates, a Ksh50,000 earner would first lose about Ksh3,000 to NSSF, Ksh1,375 to SHA and Ksh750 to the Housing Levy, a total of roughly Ksh5,125 in mandatory deductions before PAYE is even applied. That leaves a taxable pay of about Ksh44,875.
Under the current progressive tax bands and after personal relief, such a worker pays roughly Ksh5,800 in PAYE, pushing their total deductions to just over Ksh11,400 a month and leaving them with a take-home pay of about Ksh38,600.
If the proposed changes lower the top PAYE rate from 30 per cent to 25 per cent without altering the other statutory deductions, the actual gain for a Ksh50,000 earner would depend on how Parliament restructures the tax bands and reliefs.
Meanwhile, Ruto said the decisions will ensure that taxation is applied in a more equitable manner, easing the burden on low-income earners and shielding them from excessive economic strain.
Even so, the government is still under pressure to address or completely reduce other mandatory statutory deductions, such as the Housing levy, currently at 1.5 per cent, which is putting a strain on the majority of Kenyans.
