If you run payroll for a Kenyan business, PAYE is the deduction you cannot afford to get wrong. Under-deduct and you owe KRA the shortfall plus penalties; over-deduct and your staff take home less than they should. This guide walks through exactly how PAYE is calculated in 2026, with a full worked example you can follow line by line.
What is PAYE?
PAYE (Pay As You Earn) is the income tax an employer withholds from an employee's salary each month and remits to the Kenya Revenue Authority. It is charged on taxable pay — not gross salary — and it runs on a progressive scale, so higher earnings are taxed at higher rates.
The 2026 PAYE tax bands
Kenya uses five monthly PAYE bands, in force since the Finance Act 2023 and unchanged for the 2026 payroll year:
| Monthly taxable pay (KES) | Rate |
|---|---|
| First 24,000 | 10% |
| 24,001 – 32,333 | 25% |
| 32,334 – 500,000 | 30% |
| 500,001 – 800,000 | 32.5% |
| Above 800,000 | 35% |
Every resident employee also gets a personal relief of KES 2,400 per month (KES 28,800 a year), which is subtracted from the tax figure at the end.
Step 1: Work out taxable pay
This is where most manual payroll errors happen. Taxable pay is not your gross salary. First you subtract the statutory deductions that are allowable before tax:
- NSSF employee contribution
- SHIF at 2.75% of gross
- Affordable Housing Levy at 1.5% of gross
So: Taxable pay = Gross salary − NSSF − SHIF − Housing Levy. (Approved pension contributions up to KES 30,000 a month also reduce taxable pay where they apply.)
Step 2: Apply the bands
Run the taxable pay figure through the five bands cumulatively — 10% on the first slice, then 25% on the next, and so on — to get the gross tax.
Step 3: Subtract personal relief
From the gross tax, subtract the KES 2,400 personal relief (plus any insurance relief the employee qualifies for). What remains is the PAYE you remit.
Worked example: a KES 100,000 salary
Take an employee on a gross monthly salary of KES 100,000:
- NSSF (2026): KES 6,000
- SHIF (2.75%): KES 2,750
- Housing Levy (1.5%): KES 1,500
- Taxable pay: 100,000 − 6,000 − 2,750 − 1,500 = KES 89,750
Now the bands on KES 89,750:
- 10% of 24,000 = 2,400
- 25% of 8,333 = 2,083
- 30% of 57,417 = 17,225
- Gross tax = KES 21,708
Subtract personal relief of KES 2,400, and PAYE = KES 19,308. After PAYE, this employee's pay before any other deductions is about KES 70,442.
When is PAYE due?
PAYE is remitted to KRA through iTax by the 9th of the month following the payroll month. March salaries, for example, must be remitted by 9 April. Late payment attracts a 5% penalty plus interest, so the date matters as much as the maths.
Common mistakes to avoid
- Calculating PAYE on gross salary instead of taxable pay.
- Forgetting to deduct NSSF, SHIF and the Housing Levy before applying the bands.
- Using outdated bands — always confirm you are on current KRA rates.
- Missing the 9th-of-the-month deadline.
Let Force HRM do the maths
Force HRM calculates PAYE — and NSSF, SHIF and the Housing Levy — automatically on every payroll run, in the correct order, so your figures match KRA methodology every month. See how Force HRM handles your payroll.
Rates and thresholds in this guide are current for the 2026 payroll year. Statutory rates change through Finance Acts and gazette notices — always confirm against current KRA and NSSF guidance before filing.