How PAYE is Calculated in Kenya (2026 Guide)

Updated 2026 • Income Tax & Payroll Guide

PAYE (Pay As You Earn) is the income tax deducted directly from an employee’s salary by the employer and remitted to the Kenya Revenue Authority (KRA). It is one of the most important statutory deductions affecting your monthly take-home pay.

Understanding how PAYE is calculated helps you verify your payslip, plan your finances, and avoid confusion about tax deductions. Below is a clear step-by-step breakdown of how PAYE works in Kenya.

1. Determine Your Taxable Income

PAYE is calculated based on your taxable income, which is your gross salary minus allowable deductions.

• Basic salary
• Allowances (house, commuter, hardship, etc.)
• Bonuses and commissions
• Other taxable benefits

Statutory deductions that reduce taxable income include:

• NSSF contributions: 6% of pensionable pay, capped at KSh 6,480/month

Deductions taken after PAYE (do not reduce taxable income):

• SHIF: 2.75% of gross salary, minimum KSh 300
• Affordable Housing Levy: 1.5% of gross salary

Taxable Income for PAYE calculation:
Gross Salary − NSSF

2. Apply the KRA Monthly Tax Bands (2026)

Kenya uses a progressive tax system, so different portions of your income are taxed at different rates:

• 10% on the first KSh 24,000
• 25% on the next KSh 8,333
• 30% on the next KSh 467,667
• 32.5% on the next KSh 300,000
• 35% on amounts above KSh 800,000

Each portion is taxed at its specific rate, not the entire salary.

3. Calculate Gross PAYE

Apply each rate to the portion of income within that band and sum them up. This gives your Gross PAYE.

4. Subtract Personal Relief

Every resident employee qualifies for a monthly personal relief of KSh 2,400.

Net PAYE = Gross PAYE − 2,400

If Gross PAYE is less than KSh 2,400, no PAYE is payable.

Example Calculation (Corrected)

Suppose an employee has a gross salary of KSh 50,000.

1. NSSF deduction: 6% of gross = 50,000 × 0.06 = KSh 3,000
2. Taxable income for PAYE: 50,000 − 3,000 = KSh 47,000
3. Apply PAYE bands:
   • 10% of 24,000 = 2,400
   • 25% of 8,333 = 2,083.25
   • 30% of remaining 14,667 = 4,400.10
   Gross PAYE = 2,400 + 2,083.25 + 4,400.10 = 8,883.35
4. Subtract Personal Relief: 8,883.35 − 2,400 = KSh 6,483.35
5. Other deductions (after PAYE):
   • SHIF (2.75% of gross) = 50,000 × 0.0275 = 1,375
   • Housing Levy (1.5% of gross) = 50,000 × 0.015 = 750
6. Net Salary: 50,000 − (6,483.35 + 3,000 + 1,375 + 750) ≈ KSh 38,392

When Is PAYE Paid?

Employers must deduct PAYE from employees’ salaries and remit it to KRA by the 9th day of the following month.

Late remittance attracts penalties and interest.

Why Understanding PAYE Matters

• Verify payroll deductions
• Plan net income accurately
• Understand how salary increases affect taxation
• Prepare for annual tax returns

Final Thoughts

PAYE calculation may seem complex, but once broken down into taxable income, tax bands, and reliefs, it is straightforward.

To instantly calculate your PAYE and net salary using the latest Kenyan tax rates, try our Kenya Salary Calculator.