A practical reference for every major tax that shows up on Kenyan payslips, invoices, and import manifests in 2026. Written for people who want to understand — not just compute — their taxes.
PAYE (Pay As You Earn) is the income tax deducted from an employee's taxable pay and remitted to the KRA by the employer. Kenya applies five progressive tax bands effective since 1 July 2023 (Finance Act 2023), which remain in force for the 2026 payroll year.
| Monthly pay band (KES) | Rate |
|---|---|
| First 24,000 | 10% |
| Next 8,333 (i.e. 24,001 – 32,333) | 25% |
| Next 467,667 (i.e. 32,334 – 500,000) | 30% |
| Next 300,000 (i.e. 500,001 – 800,000) | 32.5% |
| Above 800,000 | 35% |
PAYE is calculated on taxable income, which is gross pay minus allowable pre-tax deductions (NSSF, SHIF, pension up to 30,000, mortgage interest up to 30,000). The Affordable Housing Levy is deducted from net pay but no longer reduces taxable income — its relief was repealed in December 2024.
Try the PAYE calculatorDeductions reduce your taxable income before PAYE is calculated. Reliefs reduce the PAYE amount itself after calculation. Mixing them up is the most common source of payslip disputes.
| Item | Type | Limit / Rate |
|---|---|---|
| Personal Relief | Relief | KES 2,400/mo |
| Insurance Relief | Relief | 15%, max 5,000/mo |
| Pension Contribution | Deduction | Max 30,000/mo |
| Mortgage Interest | Deduction | Max 30,000/mo |
| NSSF Contribution | Deduction | Max 6,480/mo |
| SHIF Contribution | Deduction | 2.75% of gross |
Insurance relief applies to life, health, or education policy premiums: you get 15% of premiums paid credited back, up to KES 5,000 per month. It's claimed after PAYE is computed, just like personal relief.
SHIF replaced NHIF on 1 October 2024. Contributions are a flat 2.75% of gross salary, with a minimum of KES 300 per month and no upper cap. Unlike NHIF's stepped bands, everyone pays the same percentage regardless of income.
SHIF reduces taxable income before PAYE is computed, so higher earners see a modest tax benefit relative to NHIF's old fixed maximum.
Try the SHIF calculatorThe AHL is 1.5% of gross salary deducted from the employee, with the employer contributing a matching 1.5%. Both portions fund the government's affordable housing programme.
Important: AHL relief was repealed in December 2024. This means the levy is still deducted from your take-home, but it does not reduce your taxable income when calculating PAYE. Older payroll tools that still deduct AHL before PAYE will systematically under-compute your tax.
Effective February 2026 (Year 4 of the NSSF Act 2013 rollout), contributions apply in two tiers:
NSSF is a pre-tax deduction — it reduces your taxable income before PAYE bands are applied. The employer's matching contribution is not taxable on the employee.
When an employer provides a loan to an employee at an interest rate lower than the prescribed market rate, a taxable fringe benefit arises. The employer — not the employee — pays FBT on this benefit at the corporate tax rate of 30%.
For January – June 2026, the prescribed market interest rate is 8%. This is the benchmark against which the employer's rate is compared.
FBT is remitted by the 9th of the following month alongside PAYE.
Try the FBT calculatorWhen a Kenyan entity receives a loan from a non-resident related party either interest-free or at a rate below the market rate, the KRA "deems" an interest at the prescribed rate. The entity must then pay withholding tax of 15% on that deemed interest.
This provision prevents profit-shifting through artificially cheap intra-group lending from offshore parents.
VAT applies to the supply of taxable goods and services. The standard rate is 16%; some petroleum products attract 8%, and essential items like unprocessed food and exports are zero-rated.
| Category | Rate |
|---|---|
| Standard rate | 16% |
| Petroleum products (select) | 8% |
| Zero-rated supplies (exports, basic foods) | 0% |
| Exempt supplies (no VAT, no input credit) | N/A |
eTIMS rules for claiming input VAT:
VAT returns are due by the 20th of the following month, even if no taxable supplies were made (a nil return is still required).
Try the VAT calculatorExcise duty is charged on specific goods and services listed in the Excise Duty Act. Rates are either ad valorem (a percentage of value) or specific (a fixed amount per unit). The lists below reflect rates current for April 2026, as amended by the Finance Act 2025 and the Tax Laws (Amendment) Act 2024.
| Item | Rate |
|---|---|
| Mobile money & bank transfer fees | 15% |
| Airtime & internet data services | 15% |
| Virtual asset transaction fees (new 2025) | 10% |
| Betting / gaming deposits (reduced by Finance Act 2025) | 5% |
| Lottery ticket value | 20% |
| Imported sugar confectionery / chocolate | 25% |
| Imported cosmetics & beauty products | 15% |
| Imported ceramics & sanitary fixtures (new 2024) | 35% |
| Imported float / polished glass (new 2024) | 35% |
| Motor vehicles ≤ 1500cc | 20% |
| Motor vehicles 1500–3000cc | 25% |
| Motor vehicles > 3000cc | 35% |
| Electric vehicles | 10% |
Alcohol, tobacco, and petroleum products are taxed per unit rather than as a percentage. The Tax Laws (Amendment) Act 2024 moved alcohol to a per-litre-of-pure-alcohol basis — the higher the ABV, the higher the tax — replacing the old flat per-litre rates. Current reference rates:
| Item | Rate |
|---|---|
| Beer | per litre of alcohol |
| Wine & spirits | per litre of alcohol |
| Cigarettes with filter | per mille (1,000 sticks) |
| Cigarettes without filter | per mille (1,000 sticks) |
| Super petrol | per litre |
| Diesel | per litre |
| Coal (new 2024) | per metric tonne |
Specific rates change annually — always consult the First Schedule of the Excise Duty Act for the current figure before invoicing or clearing goods. Our Excise calculator covers ad valorem items only; use KRA's BTLS portal for specific-duty computations.
All imports into Kenya are valued at CIF (Cost + Insurance + Freight). The KRA then stacks duties in a specific order, with each tax compounding on the previous.
| Tax | Rate | Base |
|---|---|---|
| Import Duty | 0–35% | CIF |
| Excise Duty | varies | CIF + Import Duty |
| VAT | 16% | CIF + Duty + Excise |
| IDF | 2.5% | CIF (min KES 5,000) |
| RDL | 2% | CIF |
For motor vehicles, KRA compares the declared CIF to the Current Retail Selling Price (CRSP), depreciated based on the vehicle's age, and uses the higher of the two as the customs value. Vehicles older than 8 years cannot be imported.
Missing a tax deadline triggers penalties (typically 5% of tax due or KES 10,000, whichever is higher) plus interest at 1% per month on unpaid amounts. The most important dates are:
| Tax Head | Deadline |
|---|---|
| PAYE / FBT / Housing Levy | 9th of following month |
| Withholding Tax (WHT) — all types | 5 working days after deduction |
| Deemed Interest WHT | 5 working days |
| VAT Return | 20th of following month |
| Monthly Rental Income (MRI) | 20th of following month |
| Turnover Tax (TOT) | 20th of following month |
| NSSF contributions | 9th of following month |
| SHIF contributions | 9th of following month |
| Individual annual return | 30th June |
| Instalment tax (companies) | 20th of 4th, 6th, 9th, 12th mo |
Five mandatory deductions apply to most Kenyan employees: PAYE (progressive income tax, 10–35%), SHIF (2.75% of gross, replaced NHIF in October 2024), NSSF (6% up to a cap of KES 6,480/month), and the Affordable Housing Levy (1.5% of gross).
NSSF and SHIF are pre-tax deductions — they reduce your taxable income. PAYE and the Housing Levy are calculated on the remaining taxable salary. Since December 2024 the Housing Levy no longer reduces taxable income.
Kenya applies a five-band progressive PAYE schedule: 10% on the first KES 24,000 of taxable income; 25% on the next KES 8,333; 30% on the next KES 467,667; 32.5% on the next KES 300,000; and 35% on anything above KES 800,000 per month.
Every employee is entitled to the KES 2,400/month personal relief. Insurance premiums (life, health, education) qualify for a 15% relief up to KES 5,000/month.
Individuals file via the iTax portal at itax.kra.go.ke. Employed persons filing a nil-tax IT1 return typically need only their P9 form from the employer. The annual deadline is 30 June for the preceding calendar year.
Businesses and companies file CT1 returns using the same portal, supported by audited financial statements. VAT-registered persons must use eTIMS for all invoices issued from 2024 onwards.
Fringe Benefit Tax (FBT) is charged on the deemed interest advantage when an employer gives staff a loan at a rate lower than the market rate. The tax is 30% (corporate rate) on the interest differential between the prescribed market rate (currently 8% for January–June 2026) and the rate actually charged.
FBT is the employer's cost, not the employee's — it's remitted by the 9th of the following month along with PAYE.
Registration is mandatory once your taxable turnover exceeds — or is expected to exceed — KES 5 million in any 12-month period. Non-resident digital suppliers must register regardless of turnover.
Voluntary registration below the threshold is allowed and often useful for B2B businesses that want to reclaim input VAT on purchases.
Penalties and interest apply. For PAYE, the penalty is 25% of the tax due or KES 10,000 (whichever is higher), plus 1% monthly interest on the outstanding amount. Individual annual returns filed after 30 June attract a KES 2,000 penalty (5% of tax due for companies).
Turnover Tax late filing attracts KES 1,000/month plus 5% of the tax due. Withholding tax late payment triggers 5% and 1% monthly interest.
No. The Tax Laws (Amendment) Act 2024 repealed the AHL relief effective December 2024. The 1.5% Affordable Housing Levy is still deducted by your employer, but it is no longer an allowable deduction for PAYE purposes.
Payroll systems and calculators that still subtract AHL before computing PAYE are out of date and will undercharge you on income tax.
TOT is 1.5% of gross sales (reduced from 3% by the Finance Act 2024), payable by resident businesses with annual turnover between KES 1 million and 25 million. It replaces regular income tax for eligible small traders.
TOT is filed and paid monthly via iTax or M-Pesa by the 20th of the following month. Businesses dealing in VATable supplies must register for VAT separately once they exceed KES 5 million.
Disclaimer: This guide summarises Kenyan tax law as it applies during the 2025/26 tax year. It is intended for general information only and does not constitute tax advice. For specific transactions or disputes, consult a registered tax practitioner or the Kenya Revenue Authority directly. Rates and reliefs are subject to Commissioner updates and may change mid-year.