The National Assembly has tabled the Finance Bill 2026, which includes proposed changes to Pay As You Earn (PAYE) before the closely watched vote on June 18.
Amendment documents reviewed on June 18 show Kathiani MP Robert Mbui, a strong critic of the Finance Bill 2026, introduced changes to the PAYE framework, focusing on Clause 22 of the Bill now under consideration in the National Assembly.
Under the proposed structure, annual income of up to Ksh360,000 would be taxed at 10 per cent, providing limited relief for lower-income earners at the bottom of the bracket.
The next Ksh100,000 above that threshold would attract a 17.5 per cent rate, a new band absent from the earlier structure and one that creates a more gradual taxation model.
Annual earnings between Ksh460,000 and Ksh6,072,000 would fall within the 25 per cent band, covering most middle-income salaried workers in the country.
The amendments also introduce a 27.5 per cent rate on the next Ksh3,600,000 of income, aimed at higher earners and creating a clearer distinction between middle- and upper-income groups.
Income above Ksh9,600,000 a year would be taxed at the top rate of 30 per cent, affecting the highest earners in both the public and private sectors.
These changes are likely to affect more than 3.1 million Kenyan workers within the relevant tax pool.
If approved, the PAYE band amendments are set to take effect on January 1, 2027, allowing employers and employees time to update payroll systems.
Beyond PAYE, the amendments redefine royalties to include digital payment card networks and platforms, covering fees charged for access to or participation in such systems.
The revised royalty provision applies to transaction fees, network fees, processing fees and similar charges tied to proprietary digital payment systems, a measure viewed as aimed at major card networks operating in Kenya.
The amendments also address gambling by redefining “winnings” to mean payouts from lotteries or prize competitions conducted by persons licensed under the Gambling Control Act, 2025.