Career advice · Updated October 2026
How PAYE Works in Kenya: Tax Bands, Reliefs and a Worked Example
Photo: Stan Photography / Pexels (Pexels License, free to use)
If you have ever wondered why your payslip shows so much tax, this guide explains how PAYE works in Kenya, step by step. PAYE (Pay As You Earn) is income tax that your employer deducts from your salary each month and pays to the Kenya Revenue Authority (KRA). Once you understand the order of the calculation, you can check your own payslip in minutes with our PAYE calculator.
What income does PAYE apply to?
PAYE applies to all employment income: basic salary, allowances (house, transport, commuter, airtime), bonuses, overtime, commissions, leave pay and the taxable value of non-cash benefits such as a company car. Some items are exempt or treated differently, but for most employees “gross pay” on the payslip is the starting point.
Step 1: Take off the allowable deductions
Before tax is calculated, the law allows certain deductions from gross pay. The main ones in October 2026 are:
- NSSF contributions, plus any contributions to a registered pension or provident fund, up to KSh 30,000 a month in total.
- SHIF contributions (2.75% of gross pay), deductible since 27 December 2024.
- The Affordable Housing Levy (1.5% of gross pay), deductible since 27 December 2024.
- Mortgage interest on a home you live in, up to KSh 30,000 a month, from specified lenders.
- Contributions to a registered post-retirement medical fund, up to KSh 15,000 a month.
What remains is your taxable pay. These deductions are listed on KRA’s PAYE page.
Step 2: Apply the tax bands
Kenya uses progressive monthly bands that have applied since 1 July 2023 under the Finance Act 2023. Neither the Finance Act 2025 nor the Finance Act 2026 changed them.
| Monthly taxable pay | Rate |
|---|---|
| First KSh 24,000 | 10% |
| Next KSh 8,333 | 25% |
| Next KSh 467,667 | 30% |
| Next KSh 300,000 | 32.5% |
| Above KSh 800,000 | 35% |
Each rate applies only to the slice of income inside its band. Earning more never makes your whole salary taxed at a higher rate; it is only the extra shillings that are taxed at the higher band.
Step 3: Subtract reliefs
Reliefs reduce the tax itself, not your taxable pay:
- Personal relief: KSh 2,400 a month for every resident employee, claimed from one employer only.
- Insurance relief: 15% of premiums paid on qualifying life, health or education policies, capped at KSh 5,000 a month.
If the reliefs exceed the tax, PAYE is zero. It cannot go negative.
Worked example: KSh 100,000 gross salary
| Item | KSh |
|---|---|
| Gross pay | 100,000.00 |
| NSSF (Tier I 540 + Tier II 5,460) | 6,000.00 |
| SHIF (2.75%) | 2,750.00 |
| Housing Levy (1.5%) | 1,500.00 |
| Taxable pay | 89,750.00 |
| 10% of 24,000 | 2,400.00 |
| 25% of 8,333 | 2,083.25 |
| 30% of 57,417 | 17,225.10 |
| Tax before relief | 21,708.35 |
| Less personal relief | 2,400.00 |
| PAYE | 19,308.35 |
Net pay is 100,000 − 6,000 − 2,750 − 1,500 − 19,308.35 = KSh 70,441.65. You can reproduce this in our net salary calculator.
Who pays no PAYE?
With current rates, an employee whose only income is a gross salary of up to about KSh 26,700 a month pays no PAYE, because personal relief cancels the tax after the deductions. They still pay NSSF, SHIF and the Housing Levy.
Second jobs and side income
Personal relief is given by one employer only. If you have a second job, that employer deducts tax without relief, and often at the top applicable rate, so tick “secondary employer” in our calculator. Income from a business or rental property is not under PAYE and must be declared in your annual return.
Your P9 form and annual return
By the end of February each year your employer should give you a P9 form showing your pay and PAYE for the previous year. You use it to file your annual income tax return on iTax by 30 June. If you overpaid, you may be due a refund; Business Radar explains how KRA tax refunds work and how to amend a wrong return.
When employers must pay PAYE
Employers deduct PAYE every pay period and must remit it and file the PAYE return on iTax by the 9th of the following month. Late payment attracts penalties and interest for the employer.
Will PAYE change soon?
In 2026 Treasury discussed separate legislation to ease payroll taxes, but, as of October 2026, the bands above remain the law. We will update this guide and our calculators if new rates are enacted.
Next, learn to read every line on your payslip, or browse accounting and finance jobs.
Common PAYE mistakes on payslips
Some of the most frequent errors we see when people check their payslips with our calculators are an employer still using the old NSSF limits after February 2026, PAYE being calculated before SHIF and the Housing Levy are deducted, personal relief being missed, or insurance relief not applied because the employee never gave HR their policy details. Allowances being left out of taxable pay is also a common cause of a surprise bill when you file your annual return. If your figures do not match, ask HR to show you the calculation.
Key takeaways
- PAYE is charged on taxable pay, after NSSF, SHIF, the Housing Levy and other allowable deductions.
- The bands are 10%, 25%, 30%, 32.5% and 35%, applied slice by slice.
- Personal relief of KSh 2,400 and any insurance relief reduce the tax itself.
- File your annual return by 30 June using your P9.
Frequently asked questions
What are the PAYE rates in Kenya in 2026?
10% on the first KSh 24,000 of monthly taxable pay, 25% on the next KSh 8,333, 30% to KSh 500,000, 32.5% to KSh 800,000 and 35% above that.
Is SHIF deducted before PAYE?
Yes. Since 27 December 2024 SHIF and the Housing Levy are deducted from gross pay before PAYE is calculated.
How much is personal relief in Kenya?
KSh 2,400 a month, or KSh 28,800 a year, from one employer only.
When is PAYE due?
By the 9th day of the month after the salary is paid.
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