Nairobi..18th December 2025: The banking industry has proposed a downward review of Pay As You Earn (PAYE) tax bands to raise the minimum taxable personal income from the current Sh. 24,000 to Sh. 30,000, with maximum PAYE band at 30 percent. The industry is confident this will boost disposable income, empower workers, support Micro, Small, and Medium Enterprises (MSMEs), and increase revenue collection by the government through increased consumption and investment.
In a ten-point proposal that comes at a time when the National Treasury has invited comments on tax policies to inform the Finance Bill 2026, the industry, through umbrella body, the Kenya Bankers Association (KBA), has argued that lowering the tax bands will widen the tax base, increase revenue to the government while encouraging savings and investment in businesses.
Under the proposal, the industry suggests that income below KES 30,000 be exempt from PAYE, income between KES 30,001 and KES 50,000 be taxed at 15 percent, income from KES 50,001 to KES 100,000 at 20 percent, income between KES 100,001 and KES 400,000 at 25 percent, and any income above KES 400,000 at 30 percent.
“The purchasing power of salaried Kenyans has fallen significantly in recent years. Adjusting PAYE bands is a practical step to restore household income, stimulate spending, and support businesses,” said KBA CEO Raimond Molenje, adding that when workers take home more pay, they spend more, save more, and invest more, strengthening the economy, improving loan repayment, and ultimately growing government revenue.
The proposal also recommends easing Withholding Tax and Withholding VAT remittance timelines, allowing remittance by the 5th day of the month following deduction. KBA noted that this measure would reduce compliance costs, improve cash flow for businesses, and encourage formalisation and adoption of digital payments.
Currently, PAYE rates under the Finance Act 2023 are: 10% on the first KES 24,000; 25% on the next KES 8,333; 30% on the next KES 467,667; 32.5% on the next KES 300,000; and 35% on income above KES 800,000. Additional deductions, including the 1.5% Affordable Housing Levy, 2.75% Social Health Insurance Fund contribution, and rising NSSF contributions, have significantly reduced real wages, which fell by 10.7% according to the Parliamentary Budget Office Report 2025.
Click Here to access: Proposal: Link
Click Here to access: Matrix: Link
Media Contacts
Christine Onyango
Director, Communication and Public Affairs
Kenya Bankers Association
Email: conyango@kba.co.ke
About Kenya Bankers Association
The Kenya Bankers Association (KBA) is the umbrella body for all commercial banks in Kenya, regulated by the Central Bank of Kenya (CBK). Established on 16th July 1962, KBA represents 46 member institutions with assets exceeding KES 7.7 trillion. The Association’s core mandate is to champion a stable, competitive, and inclusive banking industry by influencing legislation, regulation, and policy to enhance access to affordable credit for individuals, households, and businesses. KBA also drives financial sector development through strategic initiatives such as the launch of Pesalink, the industry’s first peer-to-peer digital payments platform. In partnership with the CBK and other stakeholders, KBA has also spearheaded key projects including the modernization of the National Payments System, the implementation of the Real Time Gross Settlement System (RTGS), and the Kenya Credit Information Sharing Initiative. Guided by its brand statement, One Industry. Transforming Kenya, KBA continues to promote a strong and professional banking sector that advances innovation, fosters financial inclusion, and supports national economic growth. Learn More: www.kba.co.ke.
