Treasury Cabinet Secretary John Mbadi has said the government will table proposed changes to Pay As You Earn (PAYE) in Parliament by the end of September 2026 as it seeks to reduce the tax burden on salaried workers.
Mbadi said on Tuesday, August 11, 2026, that Treasury was still collecting views from Kenyans and stakeholders before preparing the Income Tax Amendment Bill.
He said the government had about one month to complete the process and present the proposed changes to Parliament.
“I have a month to do public participation and get people’s opinion,” Mbadi said.
“Then we prepare tax laws amendment bill, which I will bring to Parliament. I have about a month before the end of September, it should be done.”
The proposed PAYE reforms are aimed at giving relief to workers, particularly those on lower incomes, amid concerns over shrinking take-home pay.
Proposed changes
Mbadi said Treasury had previously proposed changes affecting workers earning up to Ksh30,000 and Ksh50,000 per month. However, he said the government had received alternative proposals from stakeholders that would need to be considered before the final legislation is prepared.
“Remember, we had suggested up to 30,000, 50,000, but there are other Kenyans, especially the Bank Association, which have come up with another suggestion. We want to put them together,” he said.
Treasury had earlier proposed raising the tax-free PAYE threshold from the current Ksh24,000 to Ksh30,000. It also proposed reducing the PAYE rate for income between Ksh30,000 and Ksh50,000.
Mbadi’s latest remarks come as employers and other business groups push for wider changes to Kenya’s income tax system.
The Federation of Kenya Employers has called for broader PAYE bands and lower tax rates, arguing that high deductions have reduced workers’ disposable income.
The Kenya Bankers Association has also proposed a 5 per cent reduction in PAYE across all income tax bands, saying a broader reduction could increase disposable income and stimulate economic activity.
The competing proposals mean Treasury will have to decide whether to focus relief on lower-income workers or introduce a broader PAYE reduction.
Why PAYE relief matters
PAYE is deducted directly from employees’ salaries and remains a major source of government revenue. Any reduction would therefore have an impact on the amount collected by the Kenya Revenue Authority.
The government has previously acknowledged that raising the tax-free threshold would reduce revenue. Earlier Treasury estimates put the annual revenue impact of the proposed adjustment at about Ksh35 billion.
President William Ruto had earlier directed Treasury to develop measures to remove PAYE from the first Ksh30,000 earned by workers each month.
The proposal was not included in the Finance Bill 2026, leading to criticism and questions over whether the government had abandoned the planned relief.
Mbadi, however, maintained that the proposal remained under consideration. In June, he said its absence from the Finance Bill did not mean the government had dropped the plan.
In July 2026, Mbadi gave a September 2026 timeline for taking the legislation to Parliament after public participation and consultations.
“We have agreed with the President that I will bring back the report by the end of August, then legislation in September so that Kenyans get relief on their payslips,” he said at the time.
His latest comments suggest the process is now moving towards the preparation of the legislation.
Mbadi said Treasury would consider the views collected from Kenyans before deciding on the final structure of the PAYE reforms.
The changes could affect millions of salaried workers if Parliament approves them.