National Treasury Cabinet Secretary John Mbadi has confirmed that the government will complete its plan to review Pay As You Earn (PAYE) tax by the end of September 2026, ending months of uncertainty over the promised relief for salaried workers.
Speaking during a media briefing on Tuesday, August 11, Mbadi said Treasury still has about a month of public participation left before it can draft the Income Tax Amendment Bill for submission to Parliament. He said the process needed more time because stakeholders, including the banking sector, had submitted competing proposals that must first be reconciled.
Treasury had earlier proposed exempting workers earning up to Ksh30,000 a month from PAYE altogether, while cutting the rate for those earning between Ksh30,000 and Ksh50,000 from 30 to 25 per cent. However, the Kenya Bankers Association has pushed for an alternative approach, a flat five per cent reduction across all income tax bands, arguing it would put more money in the hands of a wider pool of workers.
“We had suggested between 30,000 and 50,000, but there are other Kenyans, especially the Kenya Bankers Association, who have come up with another suggestion,” Mbadi said, adding that Treasury wants to merge the competing ideas before finalising the bill.
The proposed changes were notably absent from the Finance Bill 2026, prompting criticism that President William Ruto had abandoned his earlier directive to Treasury to ease payroll deductions for low-income earners. Mbadi has repeatedly defended the delay, insisting the relief remains on the government’s agenda.
The Federation of Kenya Employers has also weighed in, with Executive Director Jacqueline Mugo calling for wider PAYE bands and lower rates, saying high deductions are eroding workers’ take-home pay and dampening business activity. Treasury has previously estimated that raising the tax-free threshold alone could cost the exchequer about Ksh35 billion annually in lost revenue.
Mbadi also touched on the fate of the eight per cent Value Added Tax on fuel beyond October 2026, saying any decision would depend on developments in the Middle East as the government balances inflation risks against the need for tax revenue.
Once public participation closes, the proposals will be consolidated into a Tax Laws Amendment Bill for parliamentary approval before any changes take effect.
