Treasury Cabinet Secretary John Mbadi has announced plans to abolish the annual Ksh28,800 personal tax relief currently available to employees as the government considers a new approach to taxing salaried workers.
Under the proposed changes, workers earning Ksh32,333 or less per month would be exempt from Pay As You Earn (PAYE), with the government seeking to achieve this through adjustments to income tax bands rather than the existing personal relief system.
Speaking on Thursday, October 22, Mbadi said the Treasury would submit the proposals to Parliament next week. The planned reforms will also include a proposal to eliminate stamp duty on land transactions valued below Ksh1 million.
“Recently you have heard us talk about some changes in PAYE bands to exempt those earning up to Ksh32,333 from tax. In fact, we want to do away with this thing called relief,” Mbadi said.
If approved and implemented, the changes would alter how employers calculate and deduct income tax from workers’ salaries, with low-income earners expected to benefit from the proposed tax-free threshold.
Currently, employees are entitled to personal PAYE relief of Ksh2,400 per month, amounting to Ksh28,800 annually, under Section 30 of the Income Tax Act. Employers deduct the relief from the income tax calculated on an employee’s salary before remitting the remaining amount to the Kenya Revenue Authority (KRA).
For instance, an employee whose monthly income tax amounts to Ksh5,000 currently receives Ksh2,400 in personal relief, leaving Ksh2,600 payable as PAYE.
The existing relief reduces the tax burden on salaried workers by lowering the amount deducted from their earnings. Under the proposed system, the Treasury intends to use revised tax bands to exempt qualifying low-income earners from PAYE altogether.
The proposal is subject to consideration by Parliament, meaning the current personal relief system remains in place unless the relevant changes are approved and take effect.
