What is PAYE Tax in Kenya?
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PAYE (Pay As You Earn) is Kenya's system where employers withhold income tax monthly from employee salaries based on the KRA tax bands, then remit it through the iTax portal by the 9th of the following month. It falls under the Income Tax Act (Cap 470) and ensures tax is collected from gross salary before employees receive their net pay.
Employers act as agents for the Kenya Revenue Authority (KRA), computing PAYE using the current bands and rates. They file monthly PAYE returns and remit the amounts to avoid late-payment penalties. Employees receive a P9 form by 31 January each year, detailing annual taxable income, deductions, and tax paid for filing purposes.
PAYE is a major source of government revenue, though the exact collection figures change each year, so confirm current totals on official KRA publications rather than relying on a single quoted number. Unlike freelancers who handle their own self-assessment, salaried employees benefit from employer withholding, which simplifies their compliance.
For example, if your monthly gross pay is KES 100,000, your employer applies the bands to your chargeable pay to calculate your monthly tax. Freelancers, by contrast, register on iTax, compute their own taxable income, and pay by the due date.
Current KRA Tax Bands
Kenya's PAYE tax uses five progressive bands under the Finance Act 2023, with rates running from 10% up to 35% on income above KES 800,000 per year. The Kenya Revenue Authority sets these tax bands, and rates can change, so confirm the current bands on the KRA iTax portal.
Employers withhold PAYE monthly from gross salary after allowable deductions such as NSSF and certain reliefs. Apply the progressive tax system to your taxable income, then subtract the personal relief of KES 2,400 per month (KES 28,800 per year).
If you join an employer mid-year without prior tax records, your employer may apply a higher provisional rate until your records are confirmed. Check your payslip for accurate tax computation via the iTax portal.
| Band | Monthly Taxable (KES) | Annual (KES) | Marginal Rate |
|---|---|---|---|
| 1st | 0 - 24,000 | 0 - 288,000 | 10% |
| 2nd | 24,001 - 32,333 | 288,001 - 388,000 | 25% |
| 3rd | 32,334 - 500,000 | 388,001 - 6,000,000 | 30% |
| 4th | 500,001 - 800,000 | 6,000,001 - 9,600,000 | 32.5% |
| 5th | above 800,000 | above 9,600,000 | 35% |
First Band: KES 0 to 24,000
Taxable income up to KES 24,000 per month (KES 288,000 per year) is taxed at 10%. Apply the personal relief of KES 2,400 per month to get your net tax.
For a worker with KES 22,000 of taxable pay, tax before relief is KES 2,200. After subtracting the KES 2,400 relief, the final monthly tax is KES 0. This band often results in no tax for low earners after relief.
Include basic salary, cash allowances, and overtime in chargeable pay, and deduct allowable items such as NSSF first. Use KRA's PAYE calculator on iTax for quick checks, and verify deductions on your P9 form annually.
Second Band: KES 24,001 to 32,333
The second band applies a 25% marginal rate to the portion of taxable income between KES 24,001 and KES 32,333. The first KES 24,000 is still taxed at 10%, and only the excess is taxed at 25%. Subtract the KES 2,400 personal relief afterwards.
Example: with KES 28,000 of taxable pay, the first KES 24,000 at 10% is KES 2,400, plus KES 4,000 at 25% is KES 1,000, totalling KES 3,400 before relief. Net tax is KES 1,000 after the KES 2,400 relief.
This shows how the tax brackets build progressively. Factor in NSSF first, and employers remit the tax through monthly PAYE returns.
Third Band and Above: KES 32,334 Upwards
Taxable income above KES 32,333 per month enters the higher bands: 30% on KES 32,334 to 500,000, 32.5% on KES 500,001 to 800,000, and 35% on amounts above KES 800,000 per month (above KES 9,600,000 per year). Build the cumulative tax step by step, then deduct the relief last.
For example, KES 100,000 of taxable pay is taxed as follows: KES 24,000 at 10% is KES 2,400; KES 8,333 at 25% is KES 2,083; and the remaining KES 67,667 at 30% is KES 20,300. That totals KES 24,783 before relief, and KES 22,383 after the KES 2,400 personal relief.
Include commissions, acting allowance, and other cash allowances in gross pay. Subtract mortgage interest or insurance relief if you qualify, and use the KRA tax tables for annual reconciliation.
Step 1: Determine Your Gross Monthly Salary
Start with your total earnings: basic salary plus housing allowance, cash allowances, bonuses, and the taxable value of any non-cash benefits such as a company car or employer-provided housing valued under KRA prescribed rules. This forms your gross monthly salary, the starting point for the calculation.
Follow this calculation checklist. Include your basic salary first, then add cash allowances, which are fully taxable. Next, add the taxable value of non-cash benefits using the KRA prescribed valuation, and prorate annual bonuses to the month received.
- Basic salary: your core monthly pay before any additions.
- Cash allowances: items like housing or commuter allowance, fully taxable.
- Non-cash benefits: valued under KRA prescribed rules, such as a company car or free housing.
- Bonuses: taxed in the month you receive them.
Consider this example: a KES 50,000 basic salary plus KES 15,000 housing allowance plus a KES 100,000 annual bonus spread over 12 months (about KES 8,333 per month) gives a gross salary of about KES 73,333. Always check your payslip against the KRA iTax portal for verification.
Review your employment contract for details on acting allowances, commissions, or overtime, as these count towards gross pay. Note that some non-cash benefits, such as the first KES 5,000 per month in tax-free benefits, are exempt, so confirm the current limits on the KRA iTax portal.
Step 2: Calculate Allowable Deductions
Subtract allowable deductions from gross pay to get taxable income. The main items are NSSF, SHIF, and the Affordable Housing Levy, which are now deductions from taxable income under the Tax Laws (Amendment) Act 2024.
The table below summarises these deductions. Confirm the current rates and limits on the KRA iTax portal before filing.
| Deduction | Rate | Employer Share |
|---|---|---|
| NSSF | 6% employee + 6% employer, capped at the upper earnings limit | Equal to employee |
| SHIF | 2.75% of gross, minimum KES 300, no cap | None |
| Affordable Housing Levy | 1.5% employee + 1.5% employer of gross | Equal to employee |
Always check your payslip for accuracy via the KRA iTax portal. After these deductions, proceed to the PAYE calculation on the remaining taxable income.
NSSF Contributions
NSSF is contributed under the NSSF Act No. 45 of 2013 at 6% from the employee and 6% from the employer, split into Tier I and Tier II and capped at the upper earnings limit. Through January 2026 the maximum is KES 4,320 per side per month; from February 2026 it rises to KES 6,480 per side. There are no contributions on earnings above the upper earnings limit.
For a salary at or above the upper earnings limit, the employee deduction is KES 4,320 per month through January 2026, and KES 6,480 per month from February 2026. Confirm the current limits on the NSSF or KRA iTax portal.
Employers match the contribution fully. Verify the amounts on your P9 form at year-end. NSSF lowers your taxable income for PAYE purposes.
SHIF Contributions
SHIF replaced NHIF on 1 October 2024 under the Social Health Insurance Act 2023, administered through the Social Health Authority (SHA). It is charged at 2.75% of gross monthly salary, with a minimum of KES 300 per month and no upper cap.
For example, a worker earning KES 50,000 contributes KES 1,375, and one earning KES 100,000 contributes KES 2,750. SHIF is a deduction from taxable income under the Tax Laws (Amendment) Act 2024, so it reduces your chargeable pay before PAYE applies.
The old graduated NHIF tables no longer apply. Confirm the current SHIF rate on the SHA or KRA iTax portal.
Step 3: Compute Taxable Pay
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Taxable Pay = Gross Salary minus (NSSF + SHIF + Affordable Housing Levy + any qualifying pension contribution). Subtract these allowable deductions from your total earnings to find your taxable income.
Start with your gross salary, which includes basic salary, allowances, bonuses, and commissions. Deduct NSSF, SHIF at 2.75% of gross, and the Affordable Housing Levy at 1.5% of gross. The result is the figure to which you apply the tax bands.
Consider this example. For a gross salary of KES 100,000, subtract NSSF of KES 4,320 (through January 2026), SHIF of KES 2,750, and the housing levy of KES 1,500. That gives taxable pay of KES 91,430. Always check your payslip for the exact deduction amounts.
Qualifying pension contributions, deductible up to KES 30,000 per month, also reduce taxable pay. Use the KRA iTax portal or a PAYE calculator to verify your figures.
Step 4: Apply the Tax Bands and Calculate PAYE
Apply the progressive rates to your taxable pay: 10% on the first KES 24,000, 25% on the next KES 8,333, 30% on the portion up to KES 500,000, 32.5% on KES 500,001 to 800,000, and 35% above KES 800,000 per month. Kenya uses a progressive system, so higher income faces higher rates only on the portion within each band.
Use the KRA tax tables from the iTax portal, and break the amount down band by band.
Worked example for KES 80,000 taxable pay: KES 24,000 at 10% is KES 2,400; the next KES 8,333 at 25% is KES 2,083; and the remaining KES 47,667 at 30% is KES 14,300. That totals KES 18,783 before relief.
Subtract the personal relief of KES 2,400 to get a monthly tax of KES 16,383. Employers withhold this through the PAYE system and show it on your payslip.
Understanding Kenya's PAYE Tax Bands
The tax bands determine how much tax you pay on each portion of income. The first band applies 10% to taxable income up to KES 24,000 per month, and each higher band applies its rate only to the income that falls within it.
The bands run 10%, 25%, 30%, 32.5%, and 35%, with the top 35% rate applying only above KES 800,000 per month. Always check the latest Finance Act position on the KRA iTax portal, because rates can change.
Bonuses and overtime fall into these bands too. Use a PAYE calculator or spreadsheet for quick checks.
Step-by-Step Calculation Example
Take a gross salary of KES 100,000. Deduct NSSF of KES 4,320 (through January 2026), SHIF of KES 2,750, and the housing levy of KES 1,500, which leaves taxable income of KES 91,430.
Apply the bands: KES 24,000 at 10% is KES 2,400; KES 8,333 at 25% is KES 2,083; and the remaining KES 59,097 at 30% is KES 17,729. Total PAYE before relief is about KES 22,212.
Deduct the KES 2,400 personal relief for a net monthly tax of about KES 19,812. Verify with your payslip or KRA's online tax calculator.
Common Adjustments and Reliefs
After calculating gross PAYE, apply the KES 2,400 personal relief. Further reliefs cover insurance premiums (15% of premiums, capped at KES 5,000 per month) and mortgage interest on an owner-occupied home (up to KES 30,000 per month), under the Income Tax Act.
Qualifying deductions such as NSSF, SHIF, the housing levy, and pension contributions reduce taxable pay first. Employers handle monthly remittance to KRA through PAYE returns.
For accuracy, use payroll software or consult a tax agent, and track your figures against the P9 form at year-end.
Step 5: Apply the Personal Relief (KES 2,400)
Final PAYE = tax from Step 4 minus the KES 2,400 monthly personal relief (KES 28,800 per year) under the Income Tax Act. This relief applies after you calculate tax on your taxable income.
Continuing the KES 80,000 taxable-pay example, Step 4 produced KES 18,783 before relief. Subtract the relief: KES 18,783 minus KES 2,400 is KES 16,383 final tax.
Next, compute net pay by subtracting all deductions from gross pay. For a KES 80,000 gross salary with NSSF KES 4,320, SHIF KES 2,200, housing levy KES 1,200, and PAYE KES 16,383, total deductions are about KES 24,103, leaving take-home pay of about KES 55,897. Always verify this on your payslip.
Double-check your calculation using the KRA iTax portal. The personal relief stays fixed at KES 2,400 per month regardless of income level.
Common Mistakes to Avoid
Watch for these pitfalls: using outdated bands, applying the wrong rate to a band, forgetting that SHIF replaced NHIF, missing the housing levy, and failing to reconcile your annual P9 with your payslips.
Many employees miscalculate PAYE by overlooking these issues. Fixing them ensures accurate tax calculation and compliance. Use the iTax portal for reliable guidance.
Review your payslip tax monthly against the KRA tax tables. Employers must withhold correctly, but employees should still verify their taxable income, including bonuses and overtime. For late PAYE, the penalty is the higher of 25% of the tax due or KES 10,000, plus interest, so confirm the current penalty position on the KRA iTax portal.
1. Wrong Band Application
Applying the wrong band leads to under or overpayment. Kenya's progressive system uses five rates: 10%, 25%, 30%, 32.5%, and 35%, applied to the relevant portion of taxable income. Always confirm which band each portion of your income falls into.
Use the official KRA iTax calculator for precise results. For example, taxable income of KES 50,000 spans the 10%, 25%, and 30% bands rather than being taxed at a single flat rate.
Double-check your basic salary, allowances, and allowable deductions before applying the bands.
2. Forgetting Bonuses Push Income Higher
Bonuses and commissions add to taxable income and can move part of your pay into a higher band. They are treated as part of gross pay in the month received, and employers withhold at the applicable marginal rate.
Calculate the effect using the tax computation steps on the iTax portal. Review your annual P9 form to confirm bonuses were included correctly.
3. Using Outdated Rates
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Using old tax rates ignores the current bands and reliefs. The current PAYE structure runs from 10% to 35%, with SHIF and the Affordable Housing Levy as deductions from taxable income. Always reference the latest KRA tax tables.
For example, the Affordable Housing Levy is 1.5% from the employee and 1.5% from the employer under the Affordable Housing Act 2024. Outdated figures can lead to filing errors.
Download fresh rates from the iTax portal or use up-to-date payroll software.
4. Ignoring Allowances and Benefits
Acting allowances, cash allowances, and the taxable value of non-cash benefits add to taxable income. Overlooking them understates your PAYE liability. Include all taxable items in your calculation.
Use the step-by-step guidance on the KRA site for employment income. Employers report these on payslips, but verify the deductions for NSSF and SHIF.
Missing mortgage interest or insurance relief can also distort your figures. Reconcile your records to avoid penalties.
5. Not Reconciling the Annual P9 with Payslips
Failing to match your annual P9 with your monthly payslips can hide discrepancies in your PAYE returns. The P9 summarises total gross salary, deductions, and tax withheld for the tax year.
Use a spreadsheet or a tax agent to verify the figures, and confirm any penalty position on the KRA iTax portal. Employers issue the P9 by the end of January, and employees file via the iTax portal by 30 June. Spot errors early to avoid problems at filing.
Frequently Asked Questions
How do you calculate your PAYE tax in Kenya?
Determine your gross monthly salary, subtract allowable deductions such as NSSF, SHIF (2.75% of gross), the Affordable Housing Levy (1.5%), and any qualifying pension contribution (up to KES 30,000 per month). Apply the progressive bands: 10% on the first KES 24,000, 25% on the next KES 8,333, 30% up to KES 500,000, 32.5% from KES 500,001 to 800,000, and 35% above KES 800,000 per month. Then subtract the personal relief of KES 2,400 per month. Use the KRA iTax portal to confirm current figures.
What are the current PAYE tax bands in Kenya?
The PAYE bands are: 10% on the first KES 24,000 of monthly taxable income; 25% on KES 24,001 to 32,333; 30% on KES 32,334 to 500,000; 32.5% on KES 500,001 to 800,000; and 35% on income above KES 800,000 per month. The top rate is 35%. Rates can change, so confirm the current bands on the KRA iTax portal.
What deductions can I claim when calculating PAYE in Kenya?
You can deduct NSSF (6% employee, capped at the upper earnings limit), SHIF at 2.75% of gross, the Affordable Housing Levy at 1.5% of gross, and qualifying pension contributions up to KES 30,000 per month. Mortgage interest relief is available up to KES 30,000 per month on an owner-occupied home, and insurance relief is 15% of premiums capped at KES 5,000 per month. The personal relief is KES 2,400 per month. Confirm the current limits on the KRA iTax portal.
How does the KRA iTax portal help with PAYE?
The iTax portal provides an online PAYE calculator where you can input salary, deductions, and reliefs for a computation. It also generates your tax statement, tracks remittances, and files returns, helping you stay accurate and compliant.
What is the difference between gross pay and chargeable pay?
Gross pay is your total earnings before any deductions, while chargeable pay is gross pay minus allowable deductions such as NSSF, SHIF, the housing levy, and qualifying pension contributions. PAYE is applied only to chargeable pay using the progressive bands.
How often should I verify my PAYE calculations?
Verify your PAYE monthly against your payslip and again annually at filing. Use KRA tools or consult a tax expert, especially after any Finance Act changes, to confirm the current bands and avoid under or over-remittance.