How to compute PAYE in Kenya in 2026: brackets, reliefs, and deductions

Kenyan PAYE has moved more in the last 18 months than it did in the preceding decade. The Finance Act 2023 introduced the 32.5% and 35% high-income bands. The Affordable Housing Levy became a statutory deduction in March 2024. The Social Health Authority (SHA) replaced NHIF on 1 October 2024 with a new rate and a new base. The NSSF Act 2013 finally took full effect after the 2023 Court of Appeal ruling, with Tier II contributions scaling up each February.

If your payroll system is still running the pre-2023 brackets, or still deducting a flat NHIF band, your December 2025 reconciliations were wrong. Here's how PAYE actually computes in Kenya in 2026.

What changed on the Kenyan payslip since 2023

Five moving parts you need to hold in your head:

1. Five brackets, not three. The 30% ceiling is gone. Above KSh 500,000/month the rate steps to 32.5%, and above KSh 800,000/month to 35%.
2. Affordable Housing Levy (AHL). 1.5% from the employee, 1.5% matched by the employer, on gross salary, remitted monthly. Effective since March 2024.
3. SHA replaced NHIF. 2.75% of gross pay, minimum KSh 300/month, no upper cap. The old NHIF graduated table (KSh 150 → KSh 1,700) is gone.
4. NSSF Tier I + Tier II. Tier I on the first KSh 8,000 of pensionable pay, Tier II on the next band up to the upper limit (KSh 72,000 at the Year 4 point of the phased schedule). 6% employee + 6% employer on each.
5. Personal relief unchanged at KSh 2,400/month (KSh 28,800/year). Insurance relief and mortgage relief mechanics unchanged.

KRA administers PAYE monthly via iTax; statutory deductions sit alongside it but go to different regulators (SHA, NSSF, HELB for graduates, NITA for training).

1. Start with gross pay

PAYE in Kenya is computed monthly — unlike Nigeria, you do not annualise. Take gross pay directly.

For this worked example, an employee on KSh 250,000 monthly gross, structured as:

Component	Monthly
Basic	200,000
House allowance	40,000
Transport	10,000
Gross pay	250,000

2. Compute the statutory deductions that reduce taxable income

Under Kenyan law, only specific deductions are allowed before PAYE:

• NSSF contributions (employee side) — allowable up to the statutory cap
• Post-retirement medical fund (where applicable)
• Affordable Housing Levy (employee side) — allowable as a deduction from taxable income from January 2024
• SHA contribution (employee side) — allowable from January 2025 under the SHIF Act

AHL and SHA are the two big recent additions to the allowable list. Pre-2024 payroll systems that only subtract NSSF before applying PAYE will overstate the employee's tax.

For our KSh 250,000 employee:

Deduction	Rate	Base	Monthly
NSSF Tier I	6%	First 8,000	480
NSSF Tier II	6%	Next 64,000 (to 72,000 cap)	3,840
SHA	2.75%	Gross 250,000	6,875
AHL (employee)	1.5%	Gross 250,000	3,750
Total allowable before PAYE	—	—	14,945

Taxable income = 250,000 − 14,945 = 235,055

3. Apply the 2024 bracket table

Five bands, monthly thresholds:

Band	Monthly range (KSh)	Rate
1	First 24,000	10%
2	Next 8,333 (24,001 → 32,333)	25%
3	Next 467,667 (32,334 → 500,000)	30%
4	Next 300,000 (500,001 → 800,000)	32.5%
5	Above 800,000	35%

Walking through KSh 235,055:

• Band 1: 24,000 × 10% = 2,400
• Band 2: 8,333 × 25% = 2,083.25
• Band 3: 202,722 × 30% = 60,816.60

Gross PAYE before relief = KSh 65,299.85/month

4. Apply personal relief (and any insurance/mortgage relief)

Every resident employee gets personal relief of KSh 2,400/month automatically — you do not need to apply, KRA expects you to net it.

Additional reliefs to subtract if applicable:

• Insurance relief: 15% of life/health/education premiums, capped at KSh 5,000/month
• Mortgage interest relief: actual interest on an owner-occupied home loan, capped at KSh 25,000/month

For our employee with no additional reliefs:

Net PAYE = 65,299.85 − 2,400 = KSh 62,899.85/month

5. Net pay

Pull every employee-side deduction off the gross:

Line	KSh
Gross pay	250,000
Less: NSSF (Tier I + II)	(4,320)
Less: SHA	(6,875)
Less: AHL (employee)	(3,750)
Less: PAYE (net of relief)	(62,899.85)
Net pay	172,155.15

The employer separately owes the matching 6% + 6% NSSF and 1.5% AHL on top — those don't show on the payslip but are real cash out the door.

Common mistakes we see in Kenyan payroll in 2026

1. Still running three brackets. The 32.5% and 35% bands have been law since July 2023. Payroll spreadsheets with a 30% ceiling understate PAYE for anyone earning above KSh 500,000.
2. Deducting NHIF at the old graduated rate. NHIF was wound down on 30 September 2024. From 1 October 2024 it's SHA at 2.75% of gross, minimum KSh 300. Continuing to deduct the old KSh 150 → 1,700 table is both wrong and unremitted — SHA doesn't accept NHIF numbers.
3. Ignoring AHL as an allowable deduction. Even systems that correctly deduct the 1.5% sometimes forget it also reduces taxable income. That omission inflates PAYE by roughly 0.45% of gross for a mid-bracket employee.
4. Computing SHA on basic salary. SHA is on gross pay, not basic. The same mistake was common with the NHIF migration — and it under-remits.
5. Freezing NSSF at the old KSh 200 + KSh 200 flat rate. Post-2023 Court of Appeal ruling, NSSF moved to Tier I (first KSh 8,000) + Tier II (next band), 6% each side. The Tier II upper limit scales each February and is now at KSh 72,000 for the Year 4 schedule point.
6. Missing personal relief. Every resident employee is entitled to KSh 2,400/month. Forgetting it over-deducts PAYE by KSh 28,800/year per employee.
7. Annualising like you would in Nigeria. Kenya PAYE bracket thresholds are monthly. Do not compute on annual figures — doing so pushes low-income earners into the wrong band.

Historical context: the pre-2023 regime

Only relevant if you're reconciling payroll from before July 2023:

• Brackets capped at 30% over KSh 32,333/month
• NHIF deducted on a graduated table (KSh 150 up to KSh 1,700)
• NSSF at a flat KSh 200 employee + KSh 200 employer
• No Affordable Housing Levy

Do not back-apply 2024 figures to 2022 payroll, and do not apply 2022 rates to any 2026 period. A good payroll system date-routes each period to the Act that governed it.

Does AnooreHR handle this?

Yes — AnooreHR treats Kenyan PAYE, SHA, NSSF, and AHL as profile-driven deductions. The Kenya tax profile pack holds brackets, relief amounts, and the NSSF upper-limit schedule, so when KRA moves rates (or when NSSF scales the Tier II cap each February), the change lands via profile update — not a code deploy. Multi-country companies running Nigeria and Kenya on the same platform see both countries' payroll posted to the correct GL accounts with the right statutory stack applied to each period.

Kenya is on AnooreHR's 2026 country rollout; local accountant sign-off is in progress ahead of general availability. Want to be first when Kenya goes live? Book a demo and we'll show you the Kenya profile pack alongside the Nigeria flow already in production.

Related: How AnooreHR handles payroll · Kenya SHA replaces NHIF guide · Kenya redundancy and severance guide