Mbadi Says Workers Could Gain KSh2,083 Under Proposed PAYE Changes

Treasury Cabinet Secretary John Mbadi says some workers could take home an additional KSh2,083 monthly under proposed PAYE reforms. The government plans to introduce a zero-tax band for monthly incomes of up to KSh32,353.

Speaking at the Banking Industry Total Tax Contribution 2026 event on Thursday, October 22, Mbadi explained the proposed changes. He said the plan aims to ease pressure on salaried Kenyans who have complained about reduced take-home pay.

The proposal would eliminate personal relief and instead apply a zero per cent tax rate to income within the proposed threshold. Workers earning KSh32,353 monthly could therefore retain an additional KSh2,083, according to Mbadi.

“Those who are earning up to 32,353 shillings per month” would be taxed at zero per cent, he said. Mbadi explained that the government wanted to remove the existing relief arrangement and replace it with the proposed tax-free band.

How the Proposed Tax Changes Would Work

Mbadi said the additional money could make a meaningful difference to lower-income workers. He acknowledged that KSh2,083 might appear insignificant to high earners but could help households with tighter budgets.

The Treasury Secretary indicated that the government might initially leave the other PAYE tax bands unchanged. However, he said further adjustments could be discussed as the government considers future tax policies.

The proposal follows complaints from workers who say statutory deductions have reduced their monthly earnings. Mbadi acknowledged these concerns and said the government wanted households to benefit from improvements in economic conditions.

He cited the combined cost of Social Health Authority contributions and the housing levy for someone earning KSh50,000 monthly. According to Mbadi, the two deductions amount to KSh2,125, equivalent to 4.25 per cent of that gross salary.

The government says the proposed reforms are intended to return some economic gains to households. However, workers will need to wait for the necessary legislative process before any changes become effective.

Government Also Plans Other Tax Amendments

Mbadi said the National Treasury was preparing tax amendments for submission to Parliament. Among the proposals he mentioned was a stamp duty exemption for people purchasing land valued at KSh1 million.

The proposed PAYE changes have not yet taken effect, meaning employers must continue applying the existing tax rules. Any final changes will depend on the legislative process and the provisions ultimately approved.

Bankers Want PAYE Cuts Across All Income Brackets

The Kenya Bankers Association has separately proposed reducing PAYE rates by five percentage points across all income brackets. The association argues that tax relief should extend to workers earning above the government's proposed zero-tax threshold.

KBA Chief Executive Officer Raimond Molenje said the proposal could help workers retain more of their earnings. He also linked the suggested reduction to efforts to rebuild public confidence in government.

Molenje made the remarks during the release of the association’s 2025 Total Tax Contribution Report. He said the proposed reduction was not only about increasing disposable income but also encouraging Kenyans to keep contributing to the economy.

The association's proposal differs from the Treasury's planned zero-rate band for incomes up to KSh32,353 monthly. While the government’s proposal targets earnings within that threshold, KBA wants a five-percentage-point reduction across all income brackets.

The two proposals now present different approaches to easing the tax burden on salaried workers. Their eventual impact will depend on which measures the government advances and Parliament approves.