Mbadi Targets January for New KSh32,333 PAYE Exemption Rules

National Treasury Cabinet Secretary John Mbadi has defended a major relief plan that will exempt an additional 362,846 formally employed Kenyans from paying Pay As You Earn (PAYE) income tax. The proposed government framework seeks to raise the monthly tax exemption threshold from the current KSh24,000 to KSh32,333.

The move follows a direct directive from President William Ruto and will increase the total number of salaried Kenyans exempted from PAYE from 1.329 million to approximately 1.692 million. Out of Kenya’s 3.468 million formal sector workers, about 1.778 million will continue paying PAYE under the applicable higher tax brackets.

Cabinet Secretary Mbadi framed the policy shift as a necessary reward for taxpayers who weathered strict economic stabilization policies in recent years.

“This is something that we have considered very carefully, and what has informed it is the fact that the economy was in bad shape in 2022 and measures were taken to steady it,” Mbadi said.

He noted that signs of macroeconomic recovery now allow the government to redistribute fiscal gains directly back to Kenyan households.

“Now, salaried people, the 3.5 million Kenyans who are in formal employment, those who have borne the burden of this taxation, the economy has shown signs of recovery, so we have decided that part of it should go back to Kenyans,” he said.

Under the current framework, workers earning between KSh24,000 and KSh32,333 fall into a 25 percent tax rate. The Treasury CS highlighted that these low-income earners stand to gain the most from the tax relief.

“So we now have those earning up to Sh32,333 not being taxed. They will not pay tax,” he said.

According to Mbadi, employees within the target earnings bracket will see an immediate boost of KSh2,083 in net monthly income once the changes become law.

“It will be a relief to them. For someone who earns more, they may not see a huge difference, but for these people, there will be Sh2,083 added to their net salary, and it will alleviate some of the pressures this group faces at the moment,” Mbadi said.

The National Treasury is actively drafting the legislative measure following the President’s guidance.

“It is a legislative proposal that we are working on, and chances are that we will be ready by next week as guided by the President,” he said.

Treasury officials are working around the clock to finalize the draft and submit it to the Attorney-General before introducing the bill in Parliament.

Mbadi expressed strong confidence that lawmakers will fast-track and pass the proposed legislation before going on recess, allowing the new tax structure to take effect in January.

“I am very optimistic that this will be passed before Parliament goes to recess. By January, the legislation will have taken effect,” he said.

While the proposed exemption promises significant relief to low-income earners facing cost-of-living pressures, the changes will remain subject to standard parliamentary debates and legal approval processes before taking effect.

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