The National Assembly’s Finance Committee has shot down a proposed amendment in the Finance Bill 2025 that sought to revise the Pay As You Earn (PAYE) tax bands to ease the financial strain on low and middle-income earners.
The proposal had recommended expanding the current PAYE brackets to 10%, 17.5%, 25%, 27.5%, and 30%. It also sought to empower the Treasury Cabinet Secretary to adjust these tax bands by up to 10% every three years to account for inflation.
Proponents of the changes argued that widening the tax bands would make the tax system fairer and more aligned with global standards. They said the current structure applies disproportionately high tax rates to relatively modest incomes, putting a heavier burden on working-class Kenyans.
“This is necessary because the bands are narrow and apply high rates to relatively low-income levels, which heavily burdens low and middle-income earners,” the proposal stated.
In addition, the amendment had proposed raising the minimum taxable income from Ksh 24,000 to Ksh 30,000 per month and adjusting the PAYE tax rates to 10%, 15%, 20%, 25%, and 28%. It also called for increasing personal relief from Ksh 2,400 to Ksh 3,000, measures that would have boosted workers’ disposable income.
Currently, under the 2023 Finance Act, income is taxed at 10%, 15%, 25%, 30%, and 32.5%, with the lowest band applying to earnings from Ksh 24,000.
The proposal also included recommendations for reforming statutory deductions such as NHIF, NSSF, and the housing levy into a more progressive model to help Kenyans retain more of their earnings and stimulate consumer spending.
Despite these potential benefits, the Finance Committee declined to support the proposal. It cited an ongoing review of PAYE bands by the National Treasury and urged the Treasury to accelerate the process.
“The committee observed that the National Treasury has expressed intent to review the tax bands, hence it urges the National Treasury to fast-track this process,” the report said.
The committee called for a broader, data-driven overhaul of the PAYE system to ensure it balances government revenue goals with the economic realities faced by Kenyan workers.
