Uganda Payroll and PAYE: An Employer Guide for 2026

Running payroll in Uganda means getting three separate deductions right, every month, for every employee. PAYE goes to the Uganda Revenue Authority. NSSF goes to the National Social Security Fund. Local Service Tax goes to your local government. Miss a band, mix up a rate, or forget the July-to-October LST window, and you are exposed to penalties and unhappy staff. This guide walks through all three, with a full worked example in shillings.

Every figure below is anchored to an official or authoritative source and dated. Where a number is in flux, we say so and point you to the authority.

The three deductions on a Ugandan payslip

A Ugandan employer withholds and remits three things:

1. PAYE — the income tax on employment earnings, collected under the PAYE system and remitted to URA.
2. NSSF — mandatory social security savings, split between employee and employer, remitted to the National Social Security Fund.
3. Local Service Tax (LST) — a small annual levy on earners, deducted by the employer and remitted to the local government.

PAYE and NSSF are monthly. LST is annual but collected in four instalments during the second half of the year. Let us take them one at a time.

PAYE: the URA monthly bands

For resident individuals, URA publishes a progressive monthly PAYE schedule. As of the current fiscal year, the bands are:

Monthly taxable income (UGX)	Tax on that band
0 – 235,000	Nil
235,001 – 335,000	10% of the amount above 235,000
335,001 – 410,000	20% of the amount above 335,000, plus 10,000
410,001 – 10,000,000	30% of the amount above 410,000, plus 25,000
Above 10,000,000	The 30% calculation above, plus an extra 10% on the amount above 10,000,000

Source: Uganda Revenue Authority — PAYE rates. The extra 10% on income above UGX 10,000,000 per month is a surcharge that pushes the effective top rate to 40% on the highest earnings.

Watch item for 2026/27: The Ministry of Finance has proposed raising the tax-free threshold from UGX 235,000 to UGX 335,000 per month, with the bands above it shifting accordingly. As of this writing the change is a proposal awaiting assent — it is not yet law. Confirm the enacted bands with URA before you run a payroll dated in the new fiscal year. Do not apply a proposed threshold early.

A note on non-residents: the resident bands above assume the employee is tax-resident in Uganda. Non-resident employment income is taxed differently. Establish residency before you pick a schedule.

NSSF: 5% employee, 10% employer

The National Social Security Fund is a mandatory savings scheme. The contribution is 15% of the employee's gross monthly pay, split as:

• Employee: 5% — deducted from gross pay.
• Employer: 10% — paid on top of gross pay, a real cost to the business.

Both portions land in the employee's individual NSSF account. Sources: PwC Worldwide Tax Summaries — Uganda and NSSF Uganda. Contributions are due by the 15th of the following month. An employer may elect to carry the full 15%, but the statutory minimum split is 5/10.

The 10% employer share is the number founders most often forget when budgeting a hire. A UGX 2,000,000 salary is not a UGX 2,000,000 cost — it is UGX 2,200,000 before you count anything else.

Local Service Tax: the annual levy collected July to October

LST is a levy on people in gainful employment or business, remitted to the local government (in Kampala, to KCCA). For employees it is banded by monthly gross salary, capped at a maximum of UGX 100,000 per year for the highest earners.

The employer deducts LST in four equal instalments between July and October, then remits it. So a top-band employee has UGX 25,000 withheld in each of those four months, and nothing for the rest of the year.

The exact band schedule is set under the Local Service Tax framework and assessed with the local government. Because the brackets are administered locally and revised from time to time, confirm the current employee schedule with KCCA / your local government rather than hardcoding old figures. What is stable and worth planning around: the annual ceiling of UGX 100,000 and the July-to-October collection window.

Worked example: UGX 2,000,000 per month

Take a Kampala employee, tax-resident, on a gross salary of UGX 2,000,000 per month. Here is the full arithmetic.

Step 1 — PAYE. The salary sits in the 410,001 to 10,000,000 band:

PAYE = (2,000,000 − 410,000) × 30% + 25,000 = 1,590,000 × 30% + 25,000 = 477,000 + 25,000 = UGX 502,000

Step 2 — NSSF employee (5%). 5% × 2,000,000 = UGX 100,000.

Step 3 — NSSF employer (10%). 10% × 2,000,000 = UGX 200,000 — the company's cost, not deducted from the employee.

Step 4 — LST. This employee is well above the top band, so the annual LST is UGX 100,000, collected as UGX 25,000 per month from July through October only.

Now the two views that matter:

Line	Ordinary month	July–October month
Gross	2,000,000	2,000,000
PAYE	(502,000)	(502,000)
NSSF employee (5%)	(100,000)	(100,000)
LST instalment	0	(25,000)
Employee net pay	1,398,000	1,373,000

And the employer's total cost:

Total cost = 2,000,000 gross + 200,000 NSSF employer = UGX 2,200,000 per month

The employee takes home about UGX 1.4m; the business spends about UGX 2.2m. The gap between the two is where every payroll mistake hides.

Honest limits worth knowing

• Taxable income assumptions. The example treats gross salary as PAYE-taxable. Real payslips can carry allowances and benefits-in-kind that are treated differently. Get the taxable base right before applying the bands.
• Proposed bands are not live bands. The 2026/27 threshold change is proposed only. Applying it before assent would under-withhold PAYE.
• LST brackets are local. Confirm the current schedule with your local government; the ceiling is stable, the middle bands less so.

Does AnooreHR handle this?

AnooreHR is the operating system for African SMEs — HR, payroll and finance on one shared ledger. Our tax engine is built around country "profile packs": every rate, band, and statutory rule lives in data, not code, so a jurisdiction's PAYE schedule, social-security split, and local levies can be maintained as the authority updates them. Nigeria is live today. Uganda is on the roadmap as a profile pack — the same architecture that runs Nigerian PAYE is what will carry URA bands, NSSF's 5/10 split, and the July-to-October LST window when Uganda ships. Payroll posts straight into the general ledger, staff see payslips on their own phones, and an AI assistant can draft and flag — but a human always approves anything that moves money or files with a regulator. Want to see the model? Create an account with AnooreHR or book a quick demo.

Related reading: Kenya payroll guide 2026, Rwanda payroll guide 2026, How country profile packs put the tax engine in JSON