Treasury Cabinet Secretary John Mbadi Proposes Tax Band Changes to Exempt 1.69m Workers

Treasury Cabinet Secretary John Mbadi announced fresh proposals to amend income tax bands, raising the untaxed income threshold from KSh24,000 to KSh32,333 and removing the KSh2,400 relief.

The changes would increase the number of formal-sector workers exempt from income tax to 1.69 million, up from the current 1.32 million, adding 362,846 workers.

Under the plan, workers earning between KSh32,334 and KSh50,000 would see tax reduced by up to KSh596, while those earning KSh60,000 would pay an extra KSh473, and earners of KSh100,000 and KSh200,000 would face additional liabilities of KSh892 and KSh3,867 respectively.

“We want to do away with this thing called the relief and set the PAYE rate at zero for earnings up to KSh32,333,” Mbadi said on Thursday. “We may not at this point change the other tax bands, but going forward, that’s a conversation to have.”

Salaried workers liable for payroll taxes would fall from 2.14 million to 1.77 million, representing 51 per cent of the 3,468,997 formal-sector workers, meaning almost half would be exempt.

Official data show 1.36 million Kenyans earned below KSh50,000 in 2024, accounting for 42.2 per cent of the 3.21 million formal-sector employees, while only 12 per cent earned above KSh100,000.

The Treasury also plans to scrap stamp duty on land and property transactions valued below KSh1 million and to remove the 25 per cent import duty on mobile phones, measures aimed at boosting affordable housing and digital access.

Mbadi said the tax proposals will be presented to Parliament next week for approval.

Current income-tax rates remain a bottom bracket of 10 per cent up to KSh24,000 with a KSh2,400 relief, 25 per cent for KSh24,001-32,333, 30 per cent up to KSh500,000, 32.5 per cent for KSh500,001-800,000 and 35 per cent above that, as introduced by the Finance Act 2023.

The World Bank has previously suggested raising the top rate to 38 per cent for earnings above KSh800,000 and creating an additional band to lower the burden on lower-income earners, but those proposals differ from the current Treasury plan.