Demystifying My Payslip: A Personal Guide to Understanding PAYE in Kenya
As someone who has spent years guiding organisations and managing operations, I also appreciate the importance of understanding personal finances. For millions of employees in Kenya, the monthly payslip can feel like a maze. You start with your gross salary, but after all the deductions, the amount that finally hits your bank account is much smaller. The biggest chunk usually goes to PAYE — Pay As You Earn.
PAYE is the system the Kenya Revenue Authority (KRA) uses to collect income tax from your employment earnings. Your employer deducts this tax and pays it directly to KRA. While a calculator is handy for a quick answer, I want to walk you through exactly how it all works, so you truly understand where every shilling of your salary ends up.
The KRA Tax Brackets: How Kenya Taxes Your Income
Kenya uses a progressive tax system. This simply means the more you earn, the higher the rate you pay — but only on the portion of your income within each band. Importantly, these rates apply to your taxable pay, not your full gross salary.
Table 1: KRA PAYE Tax Bands (Monthly) for 2025
| Monthly Taxable Pay (KES) | Rate of Tax |
|---|---|
| On the first 24,000 | 10% |
| On the next 8,333 | 25% |
| On the next 467,667 | 30% |
| On the next 300,000 | 32.5% |
| On any amount over 800,000 | 35% |
How You Get From Gross Salary to Take-Home Pay
The process that turns your gross salary into your net pay follows a very specific order. It’s not as straightforward as just applying a tax rate to your gross figure. Certain statutory deductions are made first to arrive at your taxable pay. Here’s how it breaks down using an example of an employee earning KES 90,000 a month.
Table 2: Sample PAYE Calculation
| Step | Details | Amount (KES) |
|---|---|---|
| 1. Gross Salary | Your total earnings before any deductions. | 90,000 |
| 2. Pension (NSSF) | Deductible contribution. For this salary, it’s KES 3,120 in 2025. | (3,120) |
| 3. Affordable Housing Levy (AHL) | 1.5% of gross salary (`1.5% x 90,000`). | (1,350) |
| 4. Social Health Insurance (SHIF) | 2.75% of gross salary (`2.75% x 90,000`). | (2,475) |
| 5. Taxable Pay | Gross salary minus NSSF, AHL, and SHIF. | 83,055 |
| 6. Gross Tax | Apply tax bands: 10% on 24,000 = 2,400 25% on 8,333 = 2,083.25 30% on (83,055 – 32,333) = 15,216.60 Total = 19,700 |
19,700 |
| 7. Tax Reliefs | Subtract your reliefs. Everyone gets Personal Relief. | (2,400) |
| 8. PAYE Payable | Gross Tax minus Reliefs. | 17,300 |
| 9. Net Pay | Gross Salary minus all statutory deductions and PAYE. | 65,755 |
The Reliefs That Lower Your PAYE
Tax reliefs reduce your tax bill shilling-for-shilling, so they’re very powerful. The Kenyan tax system gives several reliefs to employees, the most common being personal relief.
Table 3: Common Tax Reliefs for Employees
| Relief | Amount (Per Month) | Who Qualifies? |
|---|---|---|
| Personal Relief | KES 2,400 | Every resident employee automatically receives this. |
| Insurance Relief | 15% of premiums paid, up to KES 5,000. | Anyone paying life, education, or health insurance for self or family. |
| Affordable Housing Relief | 15% of AHL contributions, up to KES 9,000. | Every employee paying AHL gets this relief. |
By truly understanding these deductions and reliefs, you can better verify your payslip and take control of your personal finances. For me, this level of clarity is the foundation of smart financial planning.