The banking industry has proposed a downward review of Pay As You Earn (PAYE) tax bands to raise the minimum taxable personal income from the current Sh24,000 to Sh30,000, while setting the maximum PAYE rate at 30 percent.
The industry says the move to cut taxes will boost disposable income, empower workers, support Micro, Small, and Medium Enterprises (MSMEs), and increase government revenue through higher consumption and investment.
“The purchasing power of salaried Kenyans has fallen significantly in recent years. Adjusting PAYE bands is a practical step to restore household income, stimulate spending, and support businesses,” said Kenya Bankers Association (KBA) CEO Raimond Molenje.
Mr. Molenje added that when workers take home more pay, they spend more, save more, and invest more—strengthening the economy, improving loan repayment, and ultimately increasing government revenue.
The proposal comes at a time when the National Treasury has invited public comments on tax policies to inform the Finance Bill 2026. The industry, through its umbrella body KBA, said that lowering tax bands would widen the tax base, increase government revenue, and encourage savings and investment in businesses.
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Under the proposal, income below Sh30,000 would be exempt from PAYE; income between Sh30,001 and Sh50,000 would be taxed at 15 percent; income from Sh50,001 to Sh100,000 at 20 percent; income between Sh100,001 and Sh400,000 at 25 percent; and any income above Sh400,000 at 30 percent.
Currently, PAYE rates under the Finance Act 2023 are 10 percent on the first Sh24,000; 25 percent on the next Sh8,333; 30 percent on the next Sh467,667; 32.5 percent on the next Sh300,000; and 35 percent on income above Sh800,000.
Additional deductions—including the 1.5 percent Affordable Housing Levy, 2.75 percent Social Health Insurance Fund contribution, and rising NSSF contributions—have significantly reduced real wages, which fell by 10.7 percent according to the Parliamentary Budget Office Report 2025.
The banking industry also recommends easing Withholding Tax and Withholding VAT remittance timelines by allowing remittance by the fifth day of the month following deduction.
KBA noted that this measure would reduce compliance costs, improve cash flow for businesses, and encourage formalisation and the adoption of digital payments.
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