By Benadeta Mwaura - Reporter
Kenya, July 22 ,2026 - Millions of salaried Kenyans could begin taking home bigger pay cheques later this year after National Treasury Cabinet Secretary John Mbadi announced fresh plans to amend Kenya's Pay As You Earn (PAYE) tax structure, reviving proposals that were omitted from the Finance Act 2026.
Speaking during the launch of the 2027/28 Medium-Term Budget Preparation Process in Nairobi, Mbadi said the National Treasury will begin nationwide public participation next month before presenting proposed tax amendments to Parliament in September.
If approved, the reforms could significantly reduce the tax burden for more than 3.4 million formally employed Kenyans.
"I know the concern has been on the payslip. Next month I am embarking on public engagement to reduce the tax burden on payslips. Some of you thought we had shelved that idea, but we have not," Mbadi said.
"We have agreed with the President that I will bring back the report by the end of August, then legislation in September so that Kenyans get relief on their payslips." He added
Among the proposals under consideration is the removal of PAYE for employees earning up to KSh30,000 per month, fulfilling a pledge President William Ruto first announced earlier this year.
Another proposal seeks to lower the PAYE rate for employees earning between KSh30,000 and KSh50,000 from the current 30% to 25%, although Treasury says alternative proposals, including a uniform five-percentage-point reduction across all tax bands, will also be subjected to public participation before a final decision is made.
The reforms were initially expected to feature in the Finance Bill 2026 but were left out after Treasury indicated more consultations were needed before introducing the changes.
While the proposed reforms have been welcomed by many workers, tax experts argue the actual increase in take-home pay may be smaller than many expect.
A recent analysis by legal and tax advisory firm Cliffe Dekker Hofmeyr (CDH) notes that although expanding the lower tax band and introducing a 25% PAYE bracket would reduce deductions, the gains could be partly offset by higher statutory deductions, including increased National Social Security Fund (NSSF) contributions.
According to the analysis, an employee earning Sh100,000 per month could see only a modest increase in disposable income under the current proposal unless broader reforms are undertaken.
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The firm argues that Kenya's formal workforce continues to shoulder a disproportionate share of the country's tax burden, with PAYE remaining the single largest contributor to domestic tax revenue.
The Kenya Bankers Association (KBA), employers and tax professionals have consistently called for reforms to Kenya's income tax system, arguing that the current PAYE structure reduces disposable incomes and weakens household purchasing power.
Among the proposals previously submitted are increasing personal relief, widening lower tax bands and restructuring PAYE brackets to better reflect current economic realities and inflation.
President William Ruto had earlier acknowledged that exempting workers earning below KSh30,000 from PAYE could reduce government revenues by about KSh40 billion annually, but maintained that Treasury would identify alternative revenue sources to cushion the impact while easing pressure on low-income earners.
Treasury is expected to conduct stakeholder consultations throughout August before submitting final recommendations to President Ruto.
Should the proposals receive Cabinet approval, legislation will be tabled in Parliament in September, paving the way for what could become one of Kenya's most significant income tax reforms in recent years.
For millions of salaried Kenyans grappling with rising living costs, the coming weeks will determine whether the long-promised tax relief finally translates into larger monthly pay slips, or remains another proposal awaiting implementation.