Four formal proposals for restructuring Kenya's PAYE system are sitting on Treasury's desk right now. Each will be considered for inclusion in Finance Bill 2026, due to be tabled by 30 April 2026. They look superficially similar — all advertise themselves as relief for "ordinary Kenyans" — but the actual take-home pay outcomes differ dramatically depending on what you earn. We ran the numbers for every proposal across nine representative salaries. The winners and losers are stark.
The four proposals on the table
Before showing the impact, here's what each proposal actually says. All four target the existing five-band structure that's been in place since the Finance Act 2023.
Current law (Finance Act 2023, still in force)
10% on the first KSh 24,000; 25% on the next KSh 8,333; 30% on the next KSh 467,667; 32.5% on KSh 500,001–800,000; 35% on income above KSh 800,000. Personal relief is KSh 2,400/month.
Treasury proposal (Tax Laws Amendment Bill, February 2026 — now shelved)
Initially announced by President Ruto and CS Mbadi: 0% on the first KSh 30,000; 25% on the next KSh 20,000 (so KSh 30,001–50,000); the existing 30%/32.5%/35% structure retained above KSh 50,000. The standalone Bill was dropped in March 2026 and the proposals are now expected to be merged into Finance Bill 2026.
Kenya Bankers Association (KBA) proposal — December 2025
0% on the first KSh 30,000; 15% on KSh 30,001–50,000; 25% on KSh 50,001–500,000; 30% maximum cap above KSh 500,000 (eliminating the 32.5% and 35% bands entirely). Personal relief unchanged at KSh 2,400/month.
Kenya Private Sector Alliance (KEPSA) proposal — April 2026
Existing 10%/25%/30% bands kept on the first KSh 500,000. 30% cap on income above KSh 500,000 (eliminating the 32.5% and 35% bands). Personal relief raised from KSh 2,400 to KSh 3,000/month.
World Bank recommendation (referenced in policy debate)
The opposite direction: lower the 25% band to 15% for low earners, but raise the top band from 35% to 38% for those earning above KSh 800,000. We don't model this in detail below because it has no formal champion in the Kenyan political process — it's a multilateral suggestion, not a tabled proposal.
Take-home pay under each proposal
Here's what actually matters: how each proposal would change your monthly take-home pay. The figures below assume no pension contributions, no insurance relief, and no mortgage interest — pure salary structure. They include all other 2026 statutory deductions (NSSF Year 4, SHIF 2.75%, AHL 1.5%) which are common to every scheme.
| Gross (KSh/mo) | Current law | Treasury proposal* | KBA proposal | KEPSA proposal |
|---|---|---|---|---|
| 25,000 | 22,438 | 22,438 | 22,438 | 22,438 |
| 30,000 | 26,081 | 26,925 | 26,925 | 26,681 |
| 50,000 | 38,804 | 43,369 | 44,875 | 39,404 |
| 75,000 | 54,398 | 59,181 | 62,103 | 54,998 |
| 100,000 | 69,992 | 74,775 | 78,838 | 70,592 |
| 150,000 | 102,943 | 107,727 | 114,196 | 103,543 |
| 200,000 | 136,231 | 141,014 | 149,915 | 136,831 |
| 500,000 | 335,956 | 340,739 | 364,228 | 336,556 |
| 1,000,000 | 653,030 | 657,813 | 698,114 | 669,431 |
* Treasury figures assume the KSh 2,400 personal relief is retained alongside the 0% base band — if the relief is removed (which Treasury hasn't clarified), low-income outcomes change materially.
Who wins under each proposal — the deltas tell the real story
Looking at absolute take-home doesn't reveal who actually benefits. Here's the same data expressed as the change in take-home pay versus the current law:
| Gross (KSh/mo) | Treasury Δ | KBA Δ | KEPSA Δ |
|---|---|---|---|
| 25,000 | +0 | +0 | +0 |
| 30,000 | +844 | +844 | +600 |
| 50,000 | +4,565 | +6,071 | +600 |
| 75,000 | +4,783 | +7,705 | +600 |
| 100,000 | +4,783 | +8,846 | +600 |
| 150,000 | +4,784 | +11,253 | +600 |
| 200,000 | +4,783 | +13,684 | +600 |
| 500,000 | +4,783 | +28,272 | +600 |
| 1,000,000 | +4,783 | +45,084 | +16,401 |
What the deltas reveal
Modest, near-flat redistribution. Almost every salaried worker above KSh 50,000 gets the same ~KSh 4,800/month boost. The structure is essentially "take 4,800 off everyone's PAYE bill". Workers below KSh 25,000 already pay zero PAYE so receive nothing. This is the most politically palatable outcome — it gives something to many, takes from no one, and avoids the optics of cutting tax for high earners.
The most progressive in absolute shillings — paradoxically, by being the most regressive in proportional terms. A KSh 30,000 earner gains KSh 844/month (3% boost). A KSh 1,000,000 earner gains KSh 45,084/month (7% boost). This is because eliminating the 32.5% and 35% bands disproportionately benefits high earners. The KBA case for this is straightforward: tax-cap relief incentivises retention of skilled professionals who are being paid as companies rather than employees to dodge the top bands. Whether that's politically defensible during a cost-of-living crisis is a different question.
Almost neutral for the middle class, then a sharp benefit at the top. The +KSh 600 across most income levels is just the personal relief bump (3,000 vs 2,400 = +600 — same for everyone). Between KSh 30k and KSh 500k, KEPSA's proposal does almost nothing because it keeps the existing band structure. But above KSh 500,000, the 30% cap kicks in and a KSh 1,000,000 earner suddenly gains KSh 16,401/month. This is the most narrowly-targeted cut of the four — it's effectively a cut for the top 1% of salaried Kenyans, dressed up as universal relief.
The political landscape
Each proposal has a constituency, and understanding who's pushing what helps predict what survives the legislative process.
Treasury's proposal is politically driven — it's the President's signature campaign of "no tax on survival incomes." Politically, it has the strongest tailwind. Fiscally, it's the most conservative because it costs the Exchequer the least (low earners pay little PAYE today; the deadweight loss of zeroing the bottom band is small). The risk is that the personal relief gets quietly removed in fine print — which would actually make the proposal regressive at the bottom.
KBA's proposal is the bankers' wish list. It's intellectually coherent — eliminate the high-rate bands that drive tax arbitrage and accept lower headline rates in exchange for compliance. But it costs the Exchequer the most (KSh 45k/month given back to top earners across thousands of high earners adds up fast) and would face political headwinds during a fiscal crisis.
KEPSA's proposal is harder to characterise. It's nominally a "relief bump for everyone" (the personal relief raise) bolted onto a "tax cap for high earners" (the 30% cap). The KSh 600/month for ordinary workers is so small it's hard to see how the proposal materially helps low- and middle-income Kenyans. The 30% cap, by contrast, would deliver tens of thousands of monthly shillings to top earners. Whether Parliament will see this as "tax relief for Kenyans" or "tax relief for Kenyan executives" remains to be seen.
The World Bank suggestion — raise the top band, lower the lower bands — has no domestic champion. It would be politically attractive (taxing the wealthy more) but it's coming from a multilateral lender that Kenyans associate with austerity. No formal proposal includes it.
What it costs the Exchequer
Treasury has signalled the consolidated tax-cut package is worth roughly KSh 57 billion in foregone revenue. The proposals above vary in their fiscal cost in ways that matter:
- Treasury proposal: cheapest, perhaps KSh 15–25 billion. The 0% band on KSh 30k is a relatively small revenue loss because few workers earn between KSh 24k–30k. The 25% bracket-shift on KSh 30k–50k is more meaningful but still modest.
- KBA proposal: most expensive. Capping at 30% means every shilling currently taxed at 32.5% or 35% is now at 30% — a 2.5 to 5 percentage point cut on potentially KSh 200,000+ of monthly income for hundreds of thousands of high earners. Best estimate: KSh 60–90 billion.
- KEPSA proposal: middle cost. The personal relief bump costs KSh ~17 billion (KSh 600 × 12 months × ~2.4 million PAYE-paying employees). The 30% cap costs additional billions because it affects only the top earners.
The fact that Treasury has flagged a KSh 57 billion package suggests the final mix will be smaller than KBA wants, larger than what Treasury initially proposed alone, and very unlikely to include the full KEPSA top-cap.
What's likely to be in Finance Bill 2026 — our prediction
Without the actual Bill text, this is informed speculation. But based on the political signals, fiscal constraints, and what's leaked publicly, our base case is:
- Likely included: the 0% PAYE band up to KSh 30,000 (or possibly KSh 25,000 — the lowest-cost version of Treasury's promise). This is the President's signature commitment and politically irreversible at this point.
- Likely included: the 25% rate on the KSh 30,001–50,000 band. This is a modest sweetener that helps lower-middle-income workers.
- Possibly included: a small bump in personal relief from KSh 2,400 to perhaps KSh 2,800. KEPSA's KSh 3,000 figure is unlikely to survive in full.
- Unlikely: the KBA-style 30% top cap. The fiscal cost is too high, and politically it's hard to justify cutting taxes on million-shilling earners during a cost-of-living crisis.
- Likely: compensating revenue measures elsewhere — expanded WHT scope, VAT exemption rationalisation, tougher informal-sector enforcement, or new excise items. The KSh 57 billion package needs to be roughly revenue-neutral to be politically defensible.
The biggest unknown is the personal relief. If Treasury removes the KSh 2,400 relief while introducing the 0% band (so workers earning KSh 30,001–50,000 pay 25% with no personal relief deduction), the proposal becomes a tax increase for some KSh 25k–35k earners. This would be the inverse of what the President promised and would be politically explosive. Treasury has been notably silent on this question.
This article will be updated within 24 hours of Finance Bill 2026's tabling with the actual proposed bands, the verified take-home pay impact for every salary level, and a side-by-side comparison showing what was adopted from each proposal versus what was dropped. Bookmark this page or subscribe to our RSS feed.
How to verify what your own situation will be
The PAYE proposals will affect different workers differently depending on income level, NSSF contributions, pension contributions, insurance reliefs, and mortgage interest deductions. Once Finance Bill 2026 is published, our calculators will be updated within 48 hours. For now:
- Use the PAYE calculator to see your current take-home under existing law
- Use the Net→Gross calculator if you're negotiating a salary based on a target take-home
- Read our reverse PAYE explainer for worked examples
- Track the Bill's progression on our Finance Bill 2026 tracker
The bigger picture: Kenya's PAYE distribution problem
None of these proposals address the structural issue raised in the 2026 Budget Policy Statement: PAYE accounts for KSh 561 billion (32.3%) of domestic revenue, and it comes from approximately 3.4 million salaried workers — about 16% of the employed labour force. The other 17.4 million informally employed Kenyans contribute almost nothing to PAYE because they're outside it.
Cutting PAYE rates for the 16% who already pay it doesn't broaden the tax base. It just reduces revenue from people who are already compliant. The real reform — bringing more of the informal sector into formal taxation — is administratively hard, politically risky, and not what any of these proposals actually do. Until that broader reform happens, every PAYE proposal on the table is essentially a debate about how to redistribute the burden among the 16% who are already paying.
That's the conversation the Finance Bill 2026 won't settle, no matter what comes out next week. But the immediate question — who pays what next month — will be answered shortly. We'll publish the analysis the moment we have the text.