The Cabinet has approved the Finance Bill 2025, setting the stage for major changes in how payslips are calculated. The new rules will now require employers to include all tax reliefs and exemptions when calculating Pay As You Earn.
This change means employees will not need to visit Kenya Revenue Authority offices to claim refunds for reliefs like mortgage interest or insurance. The government believes this will make the process simpler and reduce delays for workers.
Officials say some employers have been leaving out these reliefs, forcing workers to follow up on their own. With this new law, all that responsibility now shifts to the employers.
The Finance Bill 2025 is part of President William Ruto’s plan to improve tax collection systems in the country. It supports the Bottom-Up Economic Transformation Agenda, which focuses on improving service delivery.
By reducing errors in tax refunds, the government also aims to stop misuse of public funds. There have been cases where fake refund claims were used to steal money from the system.
Another key change in the bill allows small businesses to deduct the full cost of tools and equipment in the year of purchase. This move is expected to ease financial pressure and encourage more business investments.
The bill also makes adjustments to the Income Tax Act, VAT Act, and other tax laws to help reduce legal disputes. The changes are aimed at speeding up revenue collection and reducing conflict between taxpayers and the government.
The Finance Bill 2025 includes reforms supported by the International Monetary Fund and the World Bank. These organisations want Kenya to improve public finance management.
With these changes to payslips, the government hopes to raise revenue without adding new taxes. The reforms will now be implemented after final legal procedures are completed.
By Kenyans