Treasury to Include PAYE Review in Finance Bill 2026, CS Mbadi Confirms

Treasury to Include PAYE Review in Finance Bill 2026, CS Mbadi Confirms

The National Treasury has confirmed that proposed changes to Pay As You Earn (PAYE) will now be incorporated into the Finance Bill 2026, marking a shift from an earlier plan to introduce a separate Tax Laws (Amendment) Bill.

Appearing before the Budget and Appropriations Committee of the National Assembly, Treasury Cabinet Secretary John Mbadi said the decision was driven by time constraints and the need to streamline the legislative process ahead of the annual budget cycle.

“We have turned over this as we have a few weeks to the Finance Bill. So we feel it is too close to bring some tax law adjustments,” Mbadi told lawmakers, confirming that all proposed tax reforms will now be consolidated into a single Bill.

The move effectively abandons the earlier plan to table a standalone Tax Laws (Amendment) Bill, which had been expected to introduce a series of fiscal measures projected to generate approximately Ksh57 billion in additional revenue. These measures will now form part of the broader Finance Bill 2026, which is typically used to implement tax changes aligned with the national budget.

Among the most closely watched proposals is the restructuring of PAYE bands, which could see significant relief for low- and middle-income earners. Earlier proposals suggested a 0 per cent tax rate for individuals earning up to Ksh30,000, with the next Ksh20,000 taxed at 25 per cent.

The proposed adjustments align with previous commitments made by President William Ruto, who earlier indicated that the government intends to reduce the tax burden on workers. Speaking in February, Ruto said individuals earning up to Ksh30,000 would be exempt from income tax, while those earning up to Ksh50,000 would benefit from reduced PAYE rates.

The President argued that such measures could benefit approximately 1.5 million Kenyans, providing relief amid rising living costs.

However, the proposals have sparked debate among economists and policy analysts, particularly regarding their fiscal impact and implementation framework. Questions have been raised about whether the changes would affect existing benefits such as the Ksh2,400 personal relief currently applied to taxpayers.

Concerns have also emerged over the legislative process itself, with experts warning that introducing multiple tax-related bills in quick succession could limit public participation and reduce the quality of parliamentary scrutiny.

Financial analyst Julians Amboko cautioned against what he described as “legislative fatigue,” noting that frequent changes to tax laws could create uncertainty for both taxpayers and businesses.

Meanwhile, Treasury officials have indicated that the implementation of tax relief measures will depend on the government’s ability to expand the tax base and improve revenue collection.

Principal Secretary Chris Kiptoo, while presenting the 2026 Budget Policy Statement to the National Assembly’s Finance and National Planning Committee, said the government must first strengthen compliance and broaden the number of taxpayers before reducing rates.

“Tax reduction plans will depend on the expansion of the tax base,” Kiptoo noted, underscoring the delicate balance between easing the tax burden and maintaining fiscal sustainability.

Despite the anticipated relief, Kenyan workers continue to face multiple statutory deductions that significantly reduce take-home pay. These include contributions to the National Social Security Fund (NSSF), the 2.75 per cent Social Health Authority levy, and the 1.5 per cent Housing Levy.

Analysts say the cumulative effect of these deductions has muted the impact of any single tax relief measure, raising calls for a more comprehensive review of the country’s tax and statutory contribution framework.

As the Finance Bill 2026 approaches, attention is now turning to Parliament, where the proposals are expected to undergo scrutiny and public participation before being enacted into law.

With pressure mounting to ease the cost of living while maintaining fiscal discipline, the government faces a complex policy challenge—one that will likely shape Kenya’s economic trajectory in the coming years.

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Treasury to Include PAYE Review in Finance Bill 2026, CS Mbadi Confirms