PAYE is about to change, Part 1: how we got here, and why this week matters

Last updated: 30 October 2026. The Bill has not yet been tabled. See the timeline.

Where things stand

A Bill that would change how much income tax Kenyan workers pay was expected in Parliament the week of 26 October. As of 30 October, we haven’t found any report that it has been tabled. The National Treasury said on 25 October it was still preparing the Bill for the Attorney-General. The relief was promised in February, left out of the Finance Act in June, delayed in September and reshaped on Mashujaa Day. The version on its way is not the one first announced.

Two plans are in play. The government wants to stop taxing the first KES 32,333 a month, and to scrap personal relief as part of the change. The Kenya Bankers Association (KBA) wants 5 percentage points off every band, for everyone. Neither is law yet. Until a Bill passes, your PAYE, your instalment tax and your 2026 return work exactly as before.

This is Part 1: how we got here and what’s on the table. Part 2 covers what it could mean for your pay.

How we put this together. This is Kolekta’s research, published so you can follow along. Our articles are a reaction to the news, not reporting: the original stories come from the news outlets linked below, and we bring them together in one place. Drafted with AI, but every link leads to a real article. If you see something we’ve got wrong, tell us in the comments below.

How we got here

This relief has been promised for nine months and has changed shape along the way. That’s the reason to pay attention now, and the reason not to count on it until it’s law.

• Dec 2025: KBA asks the National Treasury to raise the tax-free floor to KES 30,000 and cap the top rate at 30% (Pulse).
• 2 Feb 2026: Treasury Cabinet Secretary John Mbadi says a Tax Laws Amendment Bill is ready and he won’t wait for June’s Finance Bill. President William Ruto promises no PAYE under KES 30,000, and 25% instead of 30% for earnings up to KES 50,000 (Citizen, AllAfrica).
• 9 May 2026: The Finance Bill 2026 has no PAYE cut. Treasury says it wants to widen the tax base first (Kenyans.co.ke).
• 28 May 2026: President Ruto says the National Treasury warned the relief would cost KES 40 billion, and he approved it anyway (Citizen).
• 11 Jun 2026: Mr. Mbadi says the relief is “not off the table” and blames the delay on data analysis (Citizen).
• 23 Jun 2026: The Finance Act 2026 is signed without the PAYE cut (Citizen).
• 16 Sep 2026: Treasury pushes public participation to early October. The relief now needs its own Bill; raising the floor to KES 30,000 alone was put at about KES 35 billion a year (Pulse).
• 20 Oct 2026: Mashujaa Day: President Ruto raises the threshold to KES 32,333 and says the proposal goes to Parliament next week (The Star).
• 21 Oct 2026: Mr. Mbadi says the Bill will be ready next week and the process finished in November (Citizen).
• 22 Oct 2026: Mr. Mbadi says personal relief would go, replaced by a 0% band. The same day, KBA pitches a 5-point cut for everyone (Pulse).
• 25 Oct 2026: Mr. Mbadi says the proposal is being prepared for the Attorney-General before it goes to Parliament. He is “very optimistic” it will pass before Parliament goes on recess, and says “by January, the legislation will have taken effect” (The Star, Capital FM).
• Week of 26 Oct: The Bill was expected in Parliament. As of 30 October, we haven’t found a report that it has been tabled.
• Before recess: Mr. Mbadi’s target for Parliament to pass it.
• January 2027: Mr. Mbadi’s target for the change to take effect.

What changed between February and October: the February plan also cut the 30% rate to 25% for earnings up to KES 50,000. The October plan, as reported, drops that cut, leaves the higher bands alone, and removes personal relief instead. Middle earners who were counting on February’s promise should read the October version carefully.

Plan 1: the government’s targeted exemption

On Mashujaa Day (20 October 2026), President Ruto proposed that people earning KES 32,333 a month or less pay no PAYE (The Star). The figure was KES 30,000 when Treasury first floated it in February.

Two days later, Mr. Mbadi filled in the mechanics (Pulse, Kenyans.co.ke):

• Income up to KES 32,333 a month would be taxed at 0%.
• Personal relief (KES 2,400 a month, KES 28,800 a year) would be scrapped.
• The higher bands (30%, 32.5%, 35%) stay as they are.
• Mr. Mbadi says someone earning KES 32,333 would keep about KES 2,083 more a month.
• About 362,846 more workers would stop paying PAYE.

As of 30 October, the Bill has not been tabled. Status: proposal, not law. Mr. Mbadi is aiming for January 2027, but no date is in law yet.

The open question: does the 0% band cover the first KES 32,333 of everyone’s income, or only people who earn KES 32,333 or less? If it covers everyone, every taxpayer gains about KES 2,083 a month. If it only covers low earners, people above the line lose their KES 2,400 relief and pay more. Citizen Digital flags the same question. The Bill should answer it.

Plan 2: the bankers’ 5-point cut

On 22 October, at the launch of its 2025 Total Tax Contribution Report, KBA proposed cutting every PAYE band by 5 percentage points (Pulse). 10% becomes 5%, 25% becomes 20%, 30% becomes 25%, and so on up the bands.

KBA Chief Executive Officer Raimond Molenje argues that relief for everyone, not just low earners, would put about KES 28 billion a year back in workers’ pockets. Mr. Molenje also framed it as a trust issue: people comply more willingly when they feel the tax system gives something back.

Mr. Mbadi, speaking at the same event, said the government may not have the fiscal space for a blanket cut right now, but it could come back in future tax reviews. Status: industry proposal. Not in any Bill.

Why freelancers should watch this too

The headlines say PAYE, but the tax bands and personal relief sit in the Income Tax Act and apply to every individual, including freelancers filing an IT1. If personal relief goes, that change could reach you too, depending on how the Bill is written. Check with advisors: the Bill will confirm.

In Part 2, we work through what it could mean at different income levels for freelancers, salaried creatives, and people with both a salary and gigs.

What to do now

Nothing changes on your 2026 return because of this debate. If Mr. Mbadi’s January target holds, the new rules would apply from 2027, so your 2026 return is worked out under today’s rules. Keep going with the basics:

1. Watch for the Bill. It should say who gets the 0% band and when it starts. We’ll update this post when it lands.
2. Plan to file your 2026 return by 30 April 2027.
3. Get an eTIMS invoice for every business expense from now on.
4. Chase your WHT certificates now. No certificate, no credit.

Want to see where you stand today? Try the Kolekta tax estimator. It uses today’s rules, not the proposals.

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This is general information, not tax advice. If your situation is complicated, speak to a registered accountant.

Sources

• AllAfrica: Ruto announces tax relief for low and middle-income earners (4 Feb 2026)
• Kenyans.co.ke: Treasury explains why Finance Bill 2026 did not reduce PAYE (9 May 2026)
• Pulse: Treasury pushes back PAYE tax relief timelines (16 Sep 2026)
• The Star: Ruto proposes PAYE exemption (20 Oct 2026)
• Citizen Digital: Ruto promised PAYE relief in February, Kenyans are still waiting (Oct 2026)
• Pulse: Why bankers are pushing for universal PAYE reduction (22 Oct 2026)
• Pulse: PAYE changes Bill to reach Parliament (22 Oct 2026)
• Kenyans.co.ke: Mbadi reveals plan to scrap PAYE relief (23 Oct 2026)
• Citizen Digital: PAYE changes, the real benefit (23 Oct 2026)
• The Star: Mbadi: How Ruto’s PAYE changes will affect workers (25 Oct 2026)
• Capital FM: Mbadi: Over 362,000 more Kenyans to be exempted from PAYE (25 Oct 2026)