PAYE is worked out on taxable pay, not gross. Since 27 December 2024, NSSF, SHIF and the employee’s Housing Levy all come off before tax, so the order matters.
The order of the calculation
- Start with gross cash pay and any taxable benefits.
- Work out NSSF, SHIF and the Housing Levy.
- Deduct allowable items to reach taxable pay.
- Apply the tax bands.
- Take off personal relief and any insurance relief.
What comes off before tax
| Deduction | Limit each month |
|---|---|
| Pension contributions, including NSSF | Lowest of 30% of basic, the actual amount and KES 30,000 |
| Post-retirement medical fund | KES 15,000 |
| Mortgage interest | KES 30,000 |
| SHIF | No limit |
| Housing Levy, employee share | No limit |
The monthly bands
| Taxable pay (KES a month) | Rate |
|---|---|
| Up to 24,000 | 10% |
| 24,001 to 32,333 | 25% |
| 32,334 to 500,000 | 30% |
| 500,001 to 800,000 | 32.5% |
| Above 800,000 | 35% |
Residents then get personal relief of KES 2,400 a month. Insurance relief is 15% of qualifying premiums, up to KES 5,000 a month. Since the Finance Act 2025, employers must apply eligible reliefs automatically.
Worked example: KES 100,000 basic pay
| Item | KES |
|---|---|
| Gross pay | 100,000.00 |
| NSSF (6% up to the limits) | 6,000.00 |
| SHIF (2.75%) | 2,750.00 |
| Housing Levy (1.5%) | 1,500.00 |
| Taxable pay | 89,750.00 |
| Tax on the bands | 21,708.35 |
| Personal relief | 2,400.00 |
| PAYE | 19,308.35 |
| Net pay | 70,441.65 |
The employer also pays NSSF of KES 6,000, Housing Levy of KES 1,500 and NITA of KES 50.
Try your own figures in the PAYE calculator.
What’s proposed but isn’t law
The Tax Laws (Amendment) Bill 2026, announced in October 2026, proposes 0% PAYE on monthly income up to KES 32,333 and removing the KES 2,400 personal relief. It hasn’t been enacted, so the figures above still apply. Payroll should keep using them until a change is law and in force.