How to Calculate PAYE in Kenya: Tax Bands, Reliefs and a Worked Example

What is PAYE?

PAYE is the system through which employers deduct income tax from employees’ earnings before paying them, then remit that tax to KRA. It applies to all employment income, including salaries, wages and taxable allowances.

Each pay period you compute gross pay, apply statutory and agreed deductions, then calculate tax on the resulting chargeable pay using the KRA tax bands below.

Current KRA PAYE tax bands (monthly)

These are the monthly bands in effect today, and they are applied to taxable pay band by band. The 32.5% and 35% rates exist for higher earners, so a salary well above KES 500,000 a month moves through all five bands.

Taxable pay is gross pay less the deductions KRA allows: NSSF at 6% of pensionable earnings up to the current earnings limits, SHIF at 2.75%, the employee Affordable Housing Levy at 1.5%, registered pension contributions (up to the lower of 30% of pensionable pay or KES 30,000 a month) and mortgage interest on an owner-occupied home up to KES 30,000 a month — in that order, which is how KRA’s own PAYE calculator arrives at taxable pay.

• ✓Up to KES 24,000: taxed at 10%
• ✓KES 24,001 – KES 32,333: taxed at 25%
• ✓KES 32,334 – KES 500,000: taxed at 30%
• ✓KES 500,001 – KES 800,000: taxed at 32.5%
• ✓Above KES 800,000: taxed at 35%
• ✓Personal relief reduces every employee’s tax by KES 2,400 per month

Reliefs that reduce the tax you pay

• ✓Personal relief: KES 2,400 every month for all resident individuals.
• ✓Insurance relief: 15% of qualifying life or health insurance premiums, capped at KES 5,000 of relief a month.
• ✓The old Affordable Housing relief has been replaced: the employee housing levy contribution is now an allowable deduction against taxable pay instead.
• ✓Always confirm eligibility and current caps on the KRA iTax portal.

Worked example: a KES 60,000 monthly salary

This example assumes no pension contribution, insurance relief or mortgage interest, and no other allowances. NSSF comes off first because it is an allowable deduction against taxable pay. Every allowance and relief has its own cap, which is why payroll software is far safer than manual Excel calculations — you can also check any salary in our free PAYE calculator Kenya tool.

• ✓Gross salary = KES 60,000.00
• ✓Less NSSF at 6% of pensionable earnings = KES 3,600.00
• ✓Less SHIF at 2.75% = KES 1,650.00
• ✓Less Affordable Housing Levy at 1.5% = KES 900.00
• ✓Taxable pay = KES 53,850.00
• ✓First KES 24,000 × 10% = KES 2,400.00
• ✓Next KES 8,333 × 25% = KES 2,083.25
• ✓Remaining KES 21,517 × 30% = KES 6,455.10
• ✓Gross tax = KES 10,938.35
• ✓Less personal relief = KES 2,400.00
• ✓Net PAYE payable = KES 8,538.35

Let saloPoint calculate PAYE automatically

saloPoint applies all five current KRA tax bands, personal relief and insurance relief automatically for every employee, every pay period, and deducts the allowable SHIF, Housing Levy, pension and mortgage items before tax. It also prepares your P9, P10 and P10A tax reports and monthly PAYE returns, so you can spend your time on the business instead of recalculating tax.