Affordable Housing Levy, PAYE and the 2024 Amendments: What You Need to Know
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Affordable Housing Levy, PAYE and the 2024 Amendments: What You Need to Know

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Oct 1st, 2025

Affordable Housing Levy, PAYE and the 2024 Amendments: What You Need to Know

Kenya’s tax rules have recently changed. Between the Affordable Housing Levy (AHL) launched in 2023 and the 2024 amendments to PAYE computation, both employees and employers need to adjust quickly.

Who Pays What: AHL and PAYE Basics

Affordable Housing Levy (AHL)

  • Both employee and employer contribute 1.5 percent each of the employee’s gross monthly salary

  • Gross salary includes basic pay and regular cash allowances such as housing, commuter, and car allowance

  • Excludes non cash benefits and irregular payments such as bonuses, severance, pension, and gratuity

  • Remittance is due by the 9th working day of the following month

PAYE (Pay As You Earn)

  • Applies progressive tax rates:
    • 10 percent on the first KSh 24,000
    • 25 percent on the next KSh 8,333
    • 30 percent on the next amounts up to KSh 500,000
    • 32.5 percent for income between KSh 500,001 and 800,000
    • 35 percent for income above KSh 800,000

  • The only tax relief now available is the monthly personal relief of KSh 2,400

The Effects of the 2024 Amendments to PAYE Computation

  1. Repealed Reliefs
    Reliefs on SHIF contributions, AHL payments, and post retirement medical funds have been removed. Only personal relief remains.

  2. Simpler Relief Landscape, Lower Net Pay
    With fewer reliefs, employees will see a drop in take home pay compared to before.

  3. Payroll Systems Must Catch Up
    Any system still applying the old reliefs is now wrong. Payroll must be reconfigured to align with the new rules.

  4. Statutory Deductions Still Valid

    • SHIF is mandatory and deducted from gross salary

    • AHL contributions still apply and remain deductible in computing taxable income

    • The PAYE bands and computation rules remain the same

  5. Upcoming Change in July 2025
    From 1 July 2025, employers must automatically apply all eligible reliefs and exemptions when computing PAYE. With most reliefs repealed, only the personal relief will apply unless new ones are introduced.

Why Employers and Employees Should Care

  • Take home salary is likely to decrease compared to previous calculations

  • Employee communication is critical because staff will want to know why their net pay has changed

  • Payroll audits and compliance risks increase since errors can lead to penalties

  • Systems and policies need urgent updates to avoid miscalculations

What You Should Do Immediately

  1. Review your payroll software and remove any logic applying SHIF, AHL, or medical fund reliefs

  2. Recompute recent payslips to check for discrepancies

  3. Prepare clear communication for employees explaining the changes

  4. Test payroll settings thoroughly before implementation

  5. Monitor for further clarifications or updates from authorities

How FaidiHR Helps You Navigate These Changes

Handling tax changes and new deductions does not have to overwhelm your team. At FaidiHR, we:

  • Automate payroll with updated logic to reflect the latest amendments

  • Conduct compliance audits so your systems stay in line with the law

  • Provide employee communication templates to explain deductions clearly

  • Offer ongoing support as tax laws evolve

Call us: +254 702 339 699
Email us: sales@faidihr.com

Let FaidiHR take care of payroll and compliance so you can focus on running and growing your business.