How PAYE Tax Works in Kenya — A Complete 2026 Guide
What Is PAYE?
Pay As You Earn (PAYE) is Kenya's system for collecting income tax from employees. Under this system, your employer deducts tax from your gross salary every month and remits it directly to the Kenya Revenue Authority (KRA).
PAYE applies to all employment income — including basic salary, allowances, bonuses, overtime pay, and non-cash benefits. The legal basis is the Income Tax Act, Cap 470 and the annual Finance Acts that adjust rates.
Current PAYE Tax Bands (FY 2024/25)
Kenya uses a progressive tax system, meaning higher portions of your income are taxed at higher rates:
| Monthly Income Band | Tax Rate |
|---|---|
| First KES 24,000 | 10% |
| KES 24,001 – 32,333 | 25% |
| KES 32,334 – 500,000 | 30% |
| KES 500,001 – 800,000 | 32.5% |
| Above KES 800,000 | 35% |
A personal relief of KES 2,400 per month (KES 28,800 annually) is deducted from your calculated PAYE, reducing the final tax you pay.
Other Mandatory Deductions
Beyond PAYE, several other statutory deductions are taken from your salary:
NHIF (National Hospital Insurance Fund)
NHIF contributions are based on income bands with fixed monthly amounts. For example:
- Salary KES 6,000 – 7,999: KES 300/month
- Salary KES 12,000 – 14,999: KES 500/month
- Salary above KES 100,000: KES 1,700/month
NSSF (National Social Security Fund)
Under the NSSF Act 2013, contributions are calculated at 6% of pensionable pay:
- Tier I: Up to KES 7,000 (max contribution KES 420)
- Tier II: KES 7,001 – 36,000 (max contribution KES 1,740)
Affordable Housing Levy
Since the Finance Act 2023, all employed persons contribute 1.5% of gross salary to the Affordable Housing Levy. The employer also contributes 1.5%. The employee's portion qualifies as a tax relief, effectively reducing your PAYE.
How to Calculate Your Net Salary
Here is a simplified step-by-step process:
- Start with your gross monthly salary
- Calculate NSSF (6% of gross, capped at Tier I + II limits)
- Calculate Housing Levy (1.5% of gross)
- Subtract NSSF and Housing Levy from gross to get taxable income
- Apply PAYE tax bands to taxable income
- Subtract personal relief (KES 2,400) from calculated tax
- Calculate NHIF based on your income band
- Net Pay = Gross − PAYE − NHIF − NSSF − Housing Levy
Important Notes
- Tax returns: Even though PAYE is deducted monthly, you must file annual returns on iTax by June 30th each year.
- Tax relief: Besides personal relief, you may qualify for insurance relief (15% of premiums, max KES 5,000/month) and disability exemption if applicable.
- Non-residents: Are taxed at a flat rate of 30% on all employment income from Kenya.
Disclaimer
This guide is for informational purposes only. For official tax compliance, consult a certified public accountant (CPA-K) or visit KRA's website.
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