The Treasury Cabinet Secretary John Mbadi has announced that the government is still evaluating the possibility of increasing the tax-free income threshold for Pay-as-You-Earn (PAYE) from Ksh 24,000 to Ksh 30,000.
During the Finance Bill 2026 briefing on Monday, May 11, Mbadi addressed several unclear aspects of the proposed 2026 Finance Bill following discontent among some Kenyans.
Among the most controversial matters, Mbadi had to address assertions that the government had reneged on its commitment to incorporate income tax reductions for salaried employees earning less than Ksh50,000 in the upcoming finance bill.
According to the Cabinet Secretary, the plan to provide tax relief to Kenyans earning below Ksh 30,000 remains under active consideration, and the government has not disregarded it even though it is notably absent from the 2026 Finance Bill.
The Cabinet Secretary stated that the proposal continues to be under active consideration and could be finalized before June 30, prior to the bill’s passage in the National Assembly.
“Before the public participation concludes, we will make a determination. Before June 30 and before the Finance Bill receives approval, the government is expected to introduce amendments to align PAYE with our previous proposal to raise the tax-free income threshold from KSh 24,000 to KSh 30,000 monthly. Thus, the proposal remains under consideration.”
His clarification follows criticism from the public after PAYE relief measures were omitted from the 2026 Finance Bill proposal, contrary to earlier expectations that salaried employees would receive benefits from reduced PAYE tax deductions, particularly lower-income citizens.
The ministry had previously aimed to eliminate PAYE for Kenyans earning below Ksh30,000, while considering tax reductions for those earning below Ksh 50,000.
Nevertheless, the finance bill proposal did not include this reduction, causing concerns among the public about when these cuts would be implemented.
In response, Mbadi clarified that the government had not abandoned the proposal, noting that the ministry is running simulations to assess the reform’s impact.
According to the Cabinet Secretary, preliminary estimates indicate that the proposed adjustment could result in an annual revenue deficit of approximately Ksh 35 billion.
“We have not abandoned the PAYE issue. What my team is currently doing is conducting simulations. The initial analysis suggests we might lose about Ksh 35 billion in annual revenue, so we are examining the broader economic context. We are evaluating the current economic conditions and the effects of the personal income tax reforms implemented by the Kenya Revenue Authority,” the Cabinet Secretary added.
Should the adjustment be approved, it would provide significant relief to thousands of workers prior to the commencement of the new financial year.