Treasury Plan Lifts Tax-Free Pay Threshold: 362,846 More Workers Would Stop Paying PAYETreasury Plan Lifts Tax-Free Pay Threshold: 362,846 More Workers Would Stop Paying PAYE
Key Highlights
- Treasury wants to lift untaxed monthly income from KSh 24,000 ($184.94) to KSh 32,333 ($249.16), exempting 362,846 more formal workers.
- The plan would also scrap the KSh 2,400 ($18.49) relief every worker now gets, so some pay packets would shrink.
- Workers earning above KSh 50,000 ($385.21) a month would pay more under the proposed income tax bands.
Kenya's National Treasury plans to lift the amount of monthly income that escapes tax from KSh 24,000 ($184.94) to KSh 32,333 ($249.16), which would exempt an extra 362,846 formal-sector workers from paying income tax.
Treasury Cabinet Secretary John Mbadi said the fresh proposals will amend the current income tax bands. The changes, part of the National Treasury review of income tax policy, would also remove the KSh 2,400 ($18.49) personal relief now given to all workers, and workers earning above KSh 50,000 ($385.21) a month would pay more.
What changes for pay packets
The proposal trades a higher tax-free band for the loss of a relief that every employee currently enjoys. For a worker who ends up below the new threshold, no income tax would be deducted at all. For a worker above it, the removal of the relief means a higher monthly deduction than today, and those above KSh 50,000 are expressly named as paying more.
The figure of KSh 32,333 matches the threshold President William Ruto announced on Mashujaa Day. As Mwenendo earlier reported, a KSh 500 pay rise could cost KSh 1,733 if the line works as a hard cut-off. The Treasury statement does not say how workers just above the threshold would be treated.
What is still unknown
The details published so far do not include the full set of new bands and rates, the revenue Treasury expects to give up, or the date the changes would take effect. Parliament must still consider any amendment to income tax law before it can apply to payslips.
Workers should treat the figures as a proposal rather than a settled change. Employers and payroll teams will need the final bands before they can adjust deductions, and the Treasury has not yet published them.
In Summary
- Who proposed the change?
- Treasury Cabinet Secretary John Mbadi.
- What is proposed?
- Untaxed monthly income would rise from KSh 24,000 ($184.94) to KSh 32,333 ($249.16), and the KSh 2,400 ($18.49) relief would be removed.
- Who gains and who pays more?
- An extra 362,846 formal workers would be exempted; those earning above KSh 50,000 ($385.21) would pay more.
- How would it work?
- Treasury says the proposals will amend the current income tax bands.
- When would it apply?
- No start date has been published.
- What is still missing?
- The full bands, rates and revenue cost have not been released.