Millions of salaried Kenyans could soon enjoy bigger monthly paychecks after the National Treasury revived plans to reduce Pay As You Earn (PAYE) taxes, with public consultations expected to begin next month.
Treasury Cabinet Secretary John Mbadi said the government is revisiting proposals aimed at easing the tax burden on workers, with the final recommendations set to be presented to President William Ruto before being tabled in Parliament later this year.
If approved, the reforms are expected to benefit more than 3.4 million formal sector employees, particularly low- and middle-income earners.
Treasury to begin public consultations
Speaking during the launch of the 2027/28 Medium-Term Budget Preparation Process in Nairobi, Mbadi said the Treasury had not abandoned plans to reform PAYE despite the proposals being left out of the Finance Bill 2026.
“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.”
According to the CS, public participation will be completed in August before the proposals are submitted to Parliament for debate and possible approval.
Who stands to benefit?
Among the proposals under consideration is exempting employees earning up to KSh30,000 per month from PAYE deductions altogether.
The Treasury is also considering lowering the PAYE rate to 25 per cent for workers earning between KSh30,000 and KSh50,000 per month.
If implemented, the measures would leave affected employees with more disposable income by reducing the amount deducted from their salaries every month.
However, the proposals are still under review and will only take effect if they receive parliamentary approval.
Alternative tax proposals under review
Mbadi said the government has received several recommendations on how to ease the tax burden on employees.
One proposal suggests introducing a five per cent reduction in PAYE across all income brackets instead of targeting only lower-income earners.
The Treasury said all proposals will be subjected to public participation before a final framework is adopted.
Why the PAYE reforms matter
The renewed push comes after the proposed PAYE relief measures failed to appear in the Finance Bill 2026, despite earlier commitments by President William Ruto and the Treasury.
Previously, President Ruto announced plans to eliminate PAYE for workers earning below KSh30,000 a month while reducing tax rates for those earning between KSh30,000 and KSh50,000.
At the time, the President acknowledged the reforms could create a revenue shortfall of about KSh40 billion, but said the government was exploring alternative ways of growing the economy without increasing the tax burden on low-income earners.
If the latest proposals are approved, they would mark one of the most significant changes to Kenya’s personal income tax regime in recent years, potentially increasing take-home pay for millions of workers while reshaping the country’s tax policy.
