The Housing Levy is the one payroll deduction with a different deadline from everything else, and that alone causes half the problems with it. The other half come from paying it under the wrong tax head on iTax. Neither is hard to fix once you know where to look.
Who pays and how much
The levy is charged under the Affordable Housing Act 2024, which took effect for the levy on 19 March 2024. For salaried staff:
| Who pays | Rate | Base |
|---|---|---|
| Employee | 1.5% | Gross salary |
| Employer | 1.5% | The same gross salary, matching the employee |
There is no cap and no lower limit. A person on KES 20,000 and a director on KES 800,000 both pay 1.5%, and the employer matches each of them. Non-salaried people who earn gross income outside employment pay 1.5% themselves; that is not a payroll matter.
The employer collects the employee’s share through payroll and remits both shares to KRA, which collects the levy on behalf of the Affordable Housing Board.
The base: gross salary
The Act charges the levy on “gross salary”, and as RSM and others pointed out when it passed, the Act does not define the term. KRA’s simplified PAYE return works it out as 1.5% of the gross pay figure on the employee sheet, which includes cash pay, allowances and taxable benefits. Following the return is the safe position. If your payroll calculates the levy on basic pay only, the return will show a different figure from your payslips, and you will be underpaying.
Tax treatment since December 2024
From 27 December 2024 the employee’s levy is deducted from pay before PAYE is calculated, under the Tax Laws (Amendment) Act 2024. It replaced the old affordable housing relief of 15% of the levy. On the P9 it has its own column. The employer’s share is never part of the employee’s taxable pay or deductions; it is a cost to the business.
Worked example
Three staff paid August 2026 salary, with no benefits or other allowances:
| Employee | Gross pay | Employee levy | Employer levy |
|---|---|---|---|
| A | 50,000.00 | 750.00 | 750.00 |
| B | 90,000.00 | 1,350.00 | 1,350.00 |
| C | 30,000.00 | 450.00 | 450.00 |
| Total | 170,000.00 | 2,550.00 | 2,550.00 |
The amount to pay KRA is KES 5,100.00. The P10 shows the KES 2,550.00 collected from staff and adds the employer’s KES 2,550.00 on the tax due sheet.
The deadline is a working day, not a date
The Act says the levy must reach KRA no later than the ninth working day after the end of the month in which the salary was due. PAYE, NSSF and SHIF use the 9th calendar day, so the Housing Levy is always a little later.
For the August 2026 payroll, the working days in September run 1, 2, 3, 4, 7, 8, 9, 10, 11. The levy is due by Friday 11 September 2026, two days after PAYE. A public holiday in the first fortnight pushes the date out by a day. The Act does not define “working day”, so the usual reading is Monday to Friday excluding public holidays.
In practice, I pay the levy with PAYE on the 9th. The extra two days are rarely worth the risk of forgetting a second payment.
Declaring it on iTax
Under the simplified PAYE return in use since July 2025:
- On sheet B_Employees_Dtls_Simplified, enter each employee’s levy in the Affordable Housing Levy column (1.5% of their gross pay).
- Sheet E_Tax_Due totals the column and adds the employer’s matching share. If you paid staff who have no PIN and so aren’t on sheet B, you can amend this total upwards for their levy and your share.
- Validate the workbook, upload the zip under Returns, File Return, Income Tax - PAYE, and submit.
The full return is covered in filing the P10 on iTax.
Paying it
The levy has its own payment slip. In iTax, go to Payments, then Payment Registration. Select the tax head Agency Revenue and the sub-head Housing Levy, choose the period, enter the amount and generate the slip. Pay at a KRA partner bank or by M-Pesa to paybill 222222 with the payment registration number (PRN) as the account number.
An employer with no PAYE obligation on iTax can still pay: KRA’s guide says to go straight to Payment Registration with the same tax head and sub-head, without filing a PAYE return.
Penalty
The Act sets a penalty of 3% of the unpaid amount for each month it remains unpaid, recoverable as a civil debt. Law firm commentary on the Act noted that it does not provide for waiving that penalty. On the KES 5,100.00 above, one month late costs KES 153.00. Small, but it is charged again for every month the amount stays unpaid, and it sits on your iTax ledger until it is cleared. What late payroll filings cost puts it next to the others.
Mistakes I see most
- Paying the levy on the PAYE slip. If the slip is under Income Tax - PAYE, the money lands against PAYE. The levy shows as unpaid and the PAYE ledger shows a credit. Ask KRA to reallocate the payment rather than paying twice.
- Using basic pay as the base. Allowances and taxable benefits are part of gross pay.
- Forgetting the employer’s share. Some payrolls deduct 1.5% from staff and remit only that. The return expects both.
- Leaving out casuals and part-timers. If they are employees paid through payroll, the levy applies to them too. See casual workers.
- Not deducting it before PAYE. A payroll still applying the old 15% relief overstates PAYE and gives the wrong P9.
- Treating the 9th working day as the 9th. That one is harmless. The reverse, assuming PAYE also gets working days, is not.
Check a single figure with the free Housing Levy calculator.