AfriPulse
A push to restructure personal income tax is gathering momentum, with the Law Society of Kenya and the country’s leading tax advisory firms urging Parliament to lower Pay As You Earn rates and ease the burden on salaried workers, a reform notably absent from the Finance Bill 2026.
In a memorandum on the bill, LSK also wants the Treasury to stop taxing savings made to cooperative societies, proposing that contributions to savings and credit cooperative organisations, made through the check-off system from employment income, be granted non-taxable deduction status.
Such contributions are currently treated as taxable deductions, even though they perform much the same long-term savings and retirement function as pension payments, the Society argues.
LSK says aligning their tax treatment with that of pensions would promote structured savings and broaden financial inclusion.
Treasury CS John Mbadi, accompanied by Economic Affairs DG Albert Mwenda (background), appearing before the Budget Committee on March 26, 2026.
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Treasury
On personal income tax, LSK proposes taxing the first Ksh30,000 of monthly income at 10 per cent, the next Ksh8,333 at 20 per cent, and the next Ksh461,667 at 25 per cent.
Income in the next band of Ksh300,000 would attract 27.5 per cent, while all income above Ksh800,000 would be taxed at 30 per cent. It also wants personal relief raised to Ksh3,000 a month, effectively setting a tax-free threshold of Ksh30,000.
That call was echoed forcefully this week as financial and tax advisory firms appeared before the National Assembly’s Departmental Committee on Finance and National Planning.
On the second day of stakeholder hearings, every entity that appeared pressed for the PAYE overhaul to be written into the bill, arguing the middle class had reached a breaking point under compounding statutory deductions.
One tax firm called for a foundational rework of the brackets, proposing that the top individual rate be cut from 35 per cent to 30 per cent and that a 5-percentage-point reduction be applied across all standard bands.
The firm also urged the committee to raise the monthly personal relief to Ksh3,000 from Ksh2,400 and to set a tax-free threshold of Ksh30,000.
“The cumulative effect of increased taxes and statutory deductions has significantly reduced disposable income and purchasing power,” the firm told the committee, adding that taxing individuals at 35 per cent while companies pay 30 per cent creates inequity and disadvantages those in formal employment.
Committee Chairman Kuria Kimani cautioned that the changes would cut revenue and asked the firms to submit computations of the net effect.
“It would also be important for you as experts to present to us statistics showing the net effect of this proposal to help us make an informed decision,” he said.
A group of Kenyans talking during the Kenya at 61 celebrations on December 12, 2024.
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PCS
Source: Kenyans.co.ke | Read the Full Story…
