Stakeholders push for overhaul of PAYE bands as Parliament reviews Finance Bill 2026
By Emmanuel Rono, May 21, 2026Stakeholders have intensified calls for a comprehensive review of Pay As You Earn (PAYE) tax bands as Parliament’s Departmental Committee on Finance and National Planning begins engagements on the Finance Bill 2026.
Speaking when they submitted their proposals on the Bill to the Departmental Committee on Finance and National Planning, the Institute of Certified Public Accountants of Kenya (ICPAK) on Thursday, May 21, 2026, argued that the current tax structure places an unfair, heavy burden on lower-income earners, rendering the system regressive rather than progressive.
They told the Committee that the burden has been exercabated by a wave of statutory deductions introduced over the past two years.
“With higher deductions such as NSSF, affordable housing levy and SHIF contributions over the last 2 years, a more progressive tax rate would help increase disposable income among individuals,” ICPAK stated in its submission.
The accountants pointed out that Kenyan workers had hit the higher tax brackets compared to their regional peers.
“The current tax bands are very narrow, with the 30 per cent PAYE rate applied to individuals earning just over Ksh 32,333 per month. The progression is also very steep, with individuals earning above Ksh 500,000 per month, paying tax at the rate of Ksh 32.5 per cent. This may point to excessive taxation, which potentially erodes the purchasing power and ability of individuals to save and invest to help spur growth”, they submitted.
Addressing imbalances
To address the imbalance, ICPAK proposed a restructuring of the PAYE system, including lowering the top rate from 35 per cent to 28 per cent, aligning it with corporate tax proposals, and widening income bands. They also recommended a simplified structure of 10, 15, 20, 25, and 28 per cent tax bands, alongside raising the lowest taxable threshold to Ksh30,000 and increasing personal relief from Ksh2,400 to Ksh3,000.
The Kenya Bankers Association (KBA) also raised concerns over declining purchasing power among salaried workers, warning that statutory deductions have sharply reduced net incomes.
Additionally, the Institute called for a boost to the lowest tax threshold and personal monthly relief to cushion the lowest earners.
“Therefore, we propose both the increase in the lowest tax band to Kshs. 30,000 and the expansion of the tax bands to ensure that the higher PAYE rates apply to higher income earners”, the stated.
“We further recommend an increase in the personal relief from the current Kshs. 2,400 per month to Kshs. 3,000 per month”, they added.
KBA told the committee that employees earning about Ksh100,000 monthly have experienced an estimated 7.74 per cent drop in take-home pay between 2023 and 2026, attributing the decline to SHIF, housing levy, and increased NSSF contributions.
The bankers proposed a uniform 5 per cent reduction across PAYE bands, effectively lowering the top rate to 30 per cent, while also calling for expansion of lower tax brackets and an increase in the tax-free threshold to Ksh30,000.