In an informal engagement with the Bunge la Wananchi caucus in Nairobi on Monday, February 3, Treasury Cabinet Secretary (CS) John Mbadi assured Kenyans that there would be no further tax increases on employment income. He emphasized that the government had reached its limit and could not impose additional taxation on salaried individuals.
"The Finance Bill of this year may not have any tax adjustments upwards in terms of rates. We cannot overtax Kenyans anymore," Mbadi stated. "We have reached the limit where we are saying no more space for taxation, especially on employment income. You will not see any more taxes on employment income under my watch as the CS."
Limited Relief Amid Rising Deductions
While Mbadi’s statement may offer some relief to Kenyan workers, many still face heavy deductions on their salaries. These include contributions to the Social Health Insurance Fund, the Affordable Housing Levy, and other statutory deductions.
The government was granted approval on October 22 last year to proceed with Affordable Housing Levy deductions. The levy requires employees to contribute 1.5% of their gross salary, with employers matching the amount—bringing the total contribution to 3%.
Pension Fund Tax Exemption
Mbadi also defended his proposal to amend the Pensions Fund Act, which seeks to exempt pension funds from taxation. He explained that the move aims to protect Kenyans from excessive taxation while encouraging a stronger savings culture for retirement security.
"One of the reasons I brought that amendment was to protect myself and other Kenyans when I retire, so that when I get my pension, I take out the whole of it without surrendering anything in the form of tax," Mbadi remarked.
As the government seeks to balance tax policies with economic realities, Kenyans will be keenly watching the next steps in the Finance Bill and how they impact their take-home pay.
What’s Next for Your Finances? Stay Informed!
While the government has pledged not to increase taxes on employment income, statutory deductions still impact your take-home pay. Understanding these changes is crucial for financial planning.
Stay ahead by:
1. Keeping track of policy updates in the Finance Bill
2. Reviewing your payslip to understand deductions
3. Exploring savings options to secure your financial future
Book a FREE DEMO today to see how FaidiHR can streamline your payroll processes and keep you compliant with the changing regulations.