Kenya Plans Tax-Free Pay Up to US$249

Kenya proposes making monthly income up to Sh32,333, or about US$249, tax-free. The change would help lower-paid workers keep more of their earnings. It is a proposal announced by President William Ruto and detailed by Treasury Cabinet Secretary John Mbadi.

Under current rules, workers pay 10% on the first Sh24,000 and 25% on the next Sh8,333. A personal relief of Sh2,400 is then deducted from the tax bill. At monthly pay of Sh32,333, the resulting tax is Sh2,083. The proposal would reduce that bill to zero and remove the personal relief.

The proposal has not taken effect. Treasury says it plans to send a Bill to Parliament in the week of 26 October 2026. MPs must pass it, and the President must sign it, before employers can change withholding. Until then, current tax bands and relief remain in force.

A 0% tax rate means the government takes no income tax from the specified slice of monthly pay. Under the proposal, pay up to Sh32,333 would fall into that zero-rate treatment. This can raise take-home pay for workers whose earnings are within the proposed threshold.

PAYE means Pay As You Earn. It is income tax that an employer deducts from each salary before paying the worker. Personal relief works differently: it is a fixed credit that reduces the final tax bill by the same amount for every worker who receives it. The current relief is Sh2,400 a month.

For a worker earning Sh32,333, current bands produce Sh2,083 in tax after the relief. The proposal would make that worker’s tax zero, while removing the relief. Higher earners could therefore see different results, because the relief disappears even as the lower band becomes tax-free.

Kenya’s proposed tax-free limit would rise from Sh24,000 to Sh32,333 a month. That is an increase of Sh8,333, or about US$64 at the article’s conversion rate. The higher threshold would move more earnings into the 0% band.

The proposal could newly exempt 362,846 formal-sector workers. Business Daily and Pulse Kenya reported that figure from Treasury Cabinet Secretary John Mbadi’s briefing. A separate headline referred to 1.7 million workers, but the article notes that its text did not explain the number and no official source gave it.

The final effect is not fully known. Treasury has not published the new band widths for higher pay, so individual winners and losers cannot be calculated. The article also says the government settled the lower band but left other bands for later discussion. The proposed change remains subject to Parliament’s vote.

The proposal would eliminate the monthly income-tax bill for a worker earning Sh32,333. That matters because the worker would keep money that currently goes to the government. The article describes the change as a way to leave low-income workers with more money for food and transport.

Under current rules, the first Sh24,000 is taxed at 10%, and the next Sh8,333 is taxed at 25%. After the Sh2,400 personal relief is deducted, the worker’s monthly tax is Sh2,083. The worker therefore receives Sh2,083 less than their gross pay because of income tax.

If Parliament approves the Bill and the President signs it, the worker would pay no income tax under the proposed lower band. Their monthly take-home pay would rise by Sh2,083, before considering other deductions such as health or housing charges. No start date has been announced, so payroll does not change yet.

Personal relief currently cuts every eligible worker’s monthly tax bill by Sh2,400. Removing it means workers above the proposed tax-free threshold would lose that fixed reduction. Their tax could rise unless the new bands reduce their bill by at least the same amount.

For example, current rules tax the first Sh24,000 at 10% and the next Sh8,333 at 25%, then subtract Sh2,400. The proposal would make the lower band tax-free but remove the credit. A worker earning more than Sh32,333 could benefit from the zero-rate band yet still lose the relief on the rest of their income.

The article reports that workers earning more than Sh50,000 could pay more than now. It also warns that thousands could pay more after the relief disappears. Exact outcomes cannot be calculated because Treasury has not released the new band widths. Higher rates of 25%, 30%, 32.5% and 35% would stay.

Kenya’s Treasury, led by Cabinet Secretary John Mbadi, must prepare and send the proposed tax Bill to Parliament. Treasury says the Bill is expected in the week beginning Monday 26 October 2026. The Bill is the formal step needed to turn the announcement into a legislative proposal.

Parliament then has to examine and vote on it. The National Assembly’s finance and planning committee, chaired by Kuria Kimani, reviews tax Bills before MPs vote. The proposal would need enough parliamentary support before it could move to the final approval stage.

The President must sign the approved Bill before the new rules can take effect. The article says no Bill text had been found online by Saturday 24 October and no start date had been named. Until the process is complete, employers must withhold PAYE using the current 10% and 25% bands and the Sh2,400 personal relief.

Income-tax bands divide pay into slices, with each slice taxed at a specified rate. This lets a government tax lower earnings more lightly while applying higher rates to additional income. Kenya currently taxes the first Sh24,000 at 10% and the next Sh8,333 at 25%, with higher rates above those levels.

A tax credit works after the band calculation. Kenya’s personal relief subtracts Sh2,400 from the monthly tax bill. For someone earning Sh32,333, the bands produce tax that falls to Sh2,083 after relief. Under the proposal, the lower band would be taxed at 0%, and the relief would disappear.

This design changes both what workers keep and what the government collects. Lower-paid workers could keep more because less income is taxed. But removing the credit could increase bills for some higher earners, while a wider tax-free band could reduce state revenue. The Treasury has not published the revenue cost.