Treasury Reassures Kenyans on PAYE Tax Relief Plan Despite Omission From Finance Bill 2026

Treasury Reassures Kenyans on PAYE Tax Relief Plan Despite Omission From Finance Bill 2026

NAIROBI, Kenya, June 12, 2026 — The National Treasury has moved to calm growing public concern over the future of a proposed Pay-As-You-Earn (PAYE) tax relief initiative, with Treasury Cabinet Secretary John Mbadi assuring Kenyans that the plan remains firmly on the government’s agenda despite its absence from the Finance Bill 2026.

The clarification comes amid widespread debate following the presentation of the 2026/27 national budget, where many taxpayers expected the highly anticipated tax relief proposal to be included among the fiscal measures announced by the Treasury.

Speaking shortly after delivering the record-breaking Ksh4.8 trillion budget in Parliament on Thursday, Mbadi emphasized that the government’s commitment to easing the tax burden on low-income earners remains unchanged.

“Even if it is not in the Finance Bill, it is not off the table. I have explained that there were some data analyses we were doing, and the President has pronounced himself that that is going to be implemented,” Mbadi stated.

The Cabinet Secretary further dismissed speculation that the proposal had been quietly abandoned, insisting that the government would honour its promise once the necessary technical and fiscal assessments are completed.

“We have committed. This government is not going to lie. Wait for that commitment. It is we who committed, and it is going to be implemented,” he added.

Relief Proposal Targets Low-Income Earners

The proposed PAYE tax relief is expected to benefit thousands of salaried Kenyans earning below Ksh30,000 per month.

Currently, the tax-free threshold stands at Ksh24,000, meaning workers earning above that amount are subject to PAYE deductions. Under the proposed reforms, employees earning up to Ksh30,000 monthly would either pay significantly reduced taxes or be exempt from PAYE altogether, depending on the final structure adopted by the Treasury.

The proposal was first publicly championed by President William Ruto during the National Prayer Breakfast held in Nairobi in May.

During the event, the President directed Treasury officials to develop mechanisms that would shield lower-income earners from excessive taxation amid rising living costs.

“I told the Treasury that it is time to look at how we can slow down, especially for the low-income earners, and remove some taxes from them,” President Ruto said at the time.

The announcement was widely welcomed by workers’ unions, economists, and civil society groups, many of whom argued that increasing disposable income among low-income households could stimulate domestic consumption and support economic growth.

Why the Proposal Was Missing From the Finance Bill

The absence of the tax relief measure from the Finance Bill 2026 sparked concern among employees and policy analysts who feared that revenue pressures facing the government may have forced Treasury to shelve the plan.

However, Treasury officials have maintained that further analysis is required to determine the financial implications of implementing the proposal.

According to Mbadi, ongoing studies are examining the potential impact on government revenues, public expenditure commitments, and overall fiscal sustainability before a final decision is made.

Analysts note that while tax relief would provide immediate financial benefits to workers, it could also reduce government revenue collections at a time when Kenya continues to grapple with a large budget deficit and increasing debt obligations.

How the Tax Relief Could Become Law

For the PAYE relief proposal to take effect, the government must first complete its policy formulation and fiscal impact assessment process.

Once finalized, the proposal would need to be introduced through legislation, either as part of a supplementary Finance Bill or through a separate tax amendment bill tabled before the National Assembly.

Members of Parliament would then debate the proposal, make amendments where necessary, and vote on its adoption.

If approved by Parliament and subsequently assented to by the President, the changes would be implemented by the Kenya Revenue Authority, which would update tax systems and payroll guidelines for employers across the country.

Budget Focus Remains on Economic Recovery

The reassurance comes as the government seeks to balance taxpayer relief with ambitious development goals outlined in the 2026/27 budget.

The Ksh4.8 trillion spending plan prioritizes job creation, agricultural transformation, infrastructure development, healthcare expansion, and support for small and medium-sized enterprises.

While the government has defended the budget as a roadmap for economic growth, pressure remains high to deliver on promises aimed at reducing the cost of living for ordinary Kenyans.

For now, low-income workers awaiting PAYE relief have been urged to remain patient as Treasury completes the final technical processes required before the proposal can be formally introduced and implemented.

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Treasury Reassures Kenyans on PAYE Tax Relief Plan Despite Omission From Finance Bill 2026