Kenyan low-income earners to wait longer for promised PAYE tax relief as proposal excluded from Finance Bill

Kenyans earning up to Sh30,000 a month will have to wait longer for the promised Pay as You Earn (PAYE) tax relief after the proposal was left out of the Finance Bill 2026/27, despite assurances from President William Ruto and Treasury Cabinet Secretary John Mbadi that it will still be implemented.

Speaking on Thursday, Mbadi said the proposal remains firm in government policy, noting that it is not off the table even though it is still undergoing review due to revenue considerations.

“Even if it is not in the Finance Bill, it is not off the table. We are going to make sure that the promise by the President and the CS National Treasury will be implemented. So we wait for this,” Mbadi said.

He emphasised that the proposal had undergone extensive data analysis and review after the matter was raised earlier in the year, adding that the government had since reached a consensus and that President Ruto had made a firm decision that the PAYE adjustments would be implemented.

“The President pronounced himself three weeks ago, and you see, I’ve explained this, that there was some data and analysis that we were doing. We have now agreed, and the President has pronounced himself unequivocally that that is going to be implemented,” he said.

“We have given a commitment. This government is not going to lie to Kenyans. We have given that commitment. Wait for the commitment. It’s us who said it. No one pushed the government to say it. It is us, the President and I. We sat, we agreed, and we communicated. It will be done.”

Mbadi’s remarks come after President William Ruto publicly backed the proposed PAYE tax relief for low-income earners despite concerns from the National Treasury that the measure could result in about Sh35 billion in foregone revenue.

Speaking during the National Prayer Breakfast held at Safari Park in Nairobi, Ruto said the government had identified alternative and innovative ways of financing development projects without placing additional pressure on the national budget.

“Today we are doing many things. In fact, I did send a proposal to the Treasury that, because we have found a way to do many other things differently from how we have done them before, it is time for us to look at how we can slow down, especially for low-income earners, and remove some taxes from them,” the President said.

He disclosed that Treasury officials had initially expressed concern about the financial implications of the proposal, warning that it would create a significant gap in government revenue.

“The Treasury came back and said, ‘Oh, Mr President, you know this is going to be very big. You know it’s going to cost us Sh40 billion in this budget.’ I told them, let’s do it. Let’s do it,” he said.

The President confirmed that the tax relief is intended to benefit workers earning up to Sh30,000 per month.

“We are saying all the low-income earners, the people who earn up to Sh24,000, they’ve been paying pay as you earn at 10 per cent. We are saying they will not pay anymore. That category should even be moved to anybody who is earning Sh30,000 or less. They will not pay any taxes,” Ruto said.

Mbadi had indicated that the Treasury was conducting simulations and reviewing available reports before making a final decision.

“The simulation is presently being done. Actually, we have some reports. What we were checking was, you know, there are so many things happening at the same time. We are also looking at the overall impact on the economy,” he said.

He added that both local and international developments were being considered in the assessment process.

“Remember, there is a war in the Middle East. We are looking at the impact of that war. So that is something we must factor into our revenue projections,” he said, adding that the government was exploring ways of broadening the personal income tax base to offset the revenue that would be lost through the proposed PAYE relief.

The proposed tax changes include raising the tax-free income threshold to Sh30,000 and reducing the tax rate for middle-income earners in the 30 per cent bracket to 25 per cent. If implemented, the measures are expected to increase workers’ take-home pay by between Sh731 and more than Sh2,000, depending on their earnings.