PAYE (Pay As You Earn) in Kenya is the system under which an employer withholds income tax from employees’ salaries each month and remits it to the Kenya Revenue Authority (KRA). For a UK business outsourcing to Kenya, PAYE sits alongside three other statutory items — NSSF (pension), SHIF (health) and the Affordable Housing Levy — and all four are due by the 9th of the following month. This guide sets out the current 2025/26 rates, deadlines and a worked payroll example.
Key Facts
| Item | Current position (2025/26) |
|---|---|
| PAYE bands | 10% / 25% / 30% / 32.5% / 35% (progressive) |
| Personal relief | KES 2,400 per month (KES 28,800/year) |
| NSSF | 6% employer + 6% employee; max KES 4,320 each/month |
| NSSF limits | Lower KES 8,000; upper KES 72,000 (from Feb 2025) |
| SHIF (health) | 2.75% of gross; min KES 300; replaced NHIF Oct 2024 |
| Affordable Housing Levy | 1.5% employer + 1.5% employee of gross |
| Remittance deadline | 9th of the following month |
| PAYE filing | Monthly via KRA iTax; annual P9 certificates |
| Governing law | Income Tax Act; Employment Act 2007 |
| Late payment | Penalties plus interest (KRA); 3%/month on AHL |
Key terms
- PAYE
- Pay As You Earn — monthly income tax withheld by the employer from an employee's salary and remitted to KRA.
- Personal relief
- A fixed monthly amount (KES 2,400) subtracted from each resident employee's calculated PAYE, reducing the tax payable.
- SHIF
- The Social Health Insurance Fund, administered by the Social Health Authority (SHA); it replaced the National Hospital Insurance Fund (NHIF) on 1 October 2024.
PAYE income tax bands
Answer: Kenya applies five progressive monthly bands — 10%, 25%, 30%, 32.5% and 35% — with a personal relief of KES 2,400 deducted from the tax due.
The rates below have applied since the Finance Act 2023 and remain in force for 2025/26. Each band taxes only the income that falls within it.
| Monthly taxable pay (KES) | Rate |
|---|---|
| First 24,000 | 10% |
| Next 8,333 (24,001–32,333) | 25% |
| Next 467,667 (32,334–500,000) | 30% |
| Next 300,000 (500,001–800,000) | 32.5% |
| Above 800,000 | 35% |
Because personal relief of KES 2,400 equals 10% of the first KES 24,000, the relief effectively cancels the tax on the lowest band for most employees. Note that since the Tax Laws (Amendment) Act 2024, employee NSSF, SHIF and Housing Levy contributions are allowable deductions from gross pay before PAYE is calculated.
The other three statutory deductions
NSSF (pension)
The National Social Security Fund moved to its third phase from February 2025. The lower earnings limit is KES 8,000 and the upper limit KES 72,000. Employer and employee each pay 6%:
- Tier I: 6% of the first KES 8,000 = KES 480 each.
- Tier II: 6% of the next KES 64,000 (8,001–72,000) = KES 3,840 each.
- Maximum: KES 4,320 per month each, for salaries at or above KES 72,000.
SHIF (health)
SHIF replaced NHIF on 1 October 2024. Employers deduct 2.75% of gross salary (minimum KES 300, no upper cap) and remit it to the Social Health Authority by the 9th. SHIF is an employee contribution, but the employer is responsible for deducting and remitting it.
Affordable Housing Levy
Effective 19 March 2024, the Affordable Housing Levy is 1.5% of gross pay from the employee and a matching 1.5% from the employer (3% combined). A penalty of 3% per month applies to amounts paid late.
Worked example: KES 150,000/month employee
This illustrates how the four items interact for a mid-level professional earning KES 150,000 gross per month — a band consistent with our Kenya outsourcing rates benchmarks.
| Step | Calculation | Amount (KES) |
|---|---|---|
| NSSF (employee, capped) | 6% of 72,000 | 4,320 |
| SHIF (employee) | 2.75% of 150,000 | 4,125 |
| Housing Levy (employee) | 1.5% of 150,000 | 2,250 |
| Taxable pay | 150,000 − 10,695 | 139,305 |
| PAYE before relief | 2,400 + 2,083 + 32,092 | 36,575 |
| Less personal relief | (2,400) | |
| PAYE payable | 34,175 |
On the employer side, the additional cost for this employee is NSSF KES 4,320 plus Housing Levy KES 2,250 — about KES 6,570, or roughly 4.4% on top of gross. A useful point for UK finance teams: Kenyan employer on-costs are modest compared with UK employer National Insurance (15%), partly because NSSF is capped and there is no broad employer payroll tax. (Figures rounded; confirm against current KRA, SHA and NSSF schedules before running live payroll.)
Compliance calendar
| Obligation | Frequency | Deadline | Authority |
|---|---|---|---|
| PAYE remittance and return | Monthly | 9th of following month | KRA (iTax) |
| NSSF contributions | Monthly | 9th of following month | NSSF |
| SHIF contributions | Monthly | 9th of following month | SHA |
| Affordable Housing Levy | Monthly | 9th working day | KRA |
| P9 certificates to staff | Annual | End of January | Employer |
Penalties for non-compliance
KRA imposes penalties and interest for late or missing PAYE: late filing attracts a fixed penalty, and late payment accrues interest on the outstanding amount. The Housing Levy carries a 3% monthly penalty. Persistent default can escalate to enforcement action. Because the system is monthly and self-assessed, the practical safeguard is reliable payroll software or a provider that guarantees the filing calendar.
Employer of Record vs your own entity
UK companies have two routes to compliant Kenyan payroll:
- Own entity — register a branch or subsidiary with KRA, SHA and NSSF, and maintain local payroll, filing and audit capability. Suits larger, long-term headcount.
- Employer of Record — a local provider becomes the legal employer and operates all four statutory items, while you direct the work. This avoids entity setup and helps manage Permanent Establishment risk.
For the wider employment-law context, see the Kenya Employment Act 2007 guide, and for cross-border data obligations, the IDTA guide.
Key Takeaways
- PAYE is progressive across five bands (10%–35%) with a KES 2,400 monthly personal relief; the structure has been stable since the Finance Act 2023.
- NHIF is gone — SHIF (2.75% of gross) replaced it on 1 October 2024, a change older guides still miss.
- NSSF rose from February 2025 to a KES 72,000 upper limit, lifting the maximum contribution to KES 4,320 each side.
- All four items (PAYE, NSSF, SHIF, Housing Levy) are due by the 9th of the following month; an Employer of Record can carry the whole calendar for UK firms.
Looking for help with Kenyan payroll compliance?
If you are weighing your own entity against an Employer of Record, a Kenya-based provider can run PAYE, NSSF, SHIF and the Housing Levy correctly from month one and keep you on the filing calendar.
Find a Kenya Outsourcing Partner →
Frequently Asked Questions
What are Kenya’s PAYE tax bands for 2025/26?
PAYE is progressive: 10% on the first KES 24,000 of monthly pay, 25% on the next KES 8,333, 30% on the next KES 467,667, 32.5% on the next KES 300,000, and 35% above KES 800,000. Every resident gets a personal relief of KES 2,400 per month deducted from the tax due.
Has NHIF been replaced in Kenya?
Yes. SHIF replaced NHIF on 1 October 2024. Employers deduct 2.75% of each employee’s gross salary (minimum KES 300, no cap) and remit it to the Social Health Authority by the 9th of the following month.
What are the NSSF contribution rates in 2025?
From February 2025, NSSF uses a lower limit of KES 8,000 and an upper limit of KES 72,000. Employee and employer each contribute 6%, to a maximum of KES 4,320 per month each (KES 480 Tier I plus KES 3,840 Tier II).
When are Kenyan payroll taxes due?
PAYE, NSSF, SHIF and the Affordable Housing Levy are all remitted by the 9th of the month following the payroll month. PAYE returns are filed on KRA’s iTax platform; late payment attracts penalties and interest.
Can a UK company run Kenyan PAYE without a local entity?
Yes, through an Employer of Record. The EOR becomes the legal employer in Kenya and operates PAYE, NSSF, SHIF and the Housing Levy, while the UK company directs the work. Running your own entity is the alternative but requires local registration and payroll infrastructure.
Sources & References
- Kenya Revenue Authority, “Pay As You Earn (PAYE),” accessed 2026-06-13. https://www.kra.go.ke/individual/filing-paying/types-of-taxes/paye
- Kenya Revenue Authority, “PAYE rates and Finance Act 2023 changes,” accessed 2026-06-13. https://www.kra.go.ke/images/publications/PAYE-AS-YOU-EARN-PAYE_4-01-2025.pdf
- NSSF Kenya, “New Member Contribution Rates (2025),” accessed 2026-06-13. https://www.nssf.or.ke/new-contribution-rates
- EY Global, “Kenya employers to begin contributions to the Social Health Insurance Fund (SHIF),” accessed 2026-06-13. https://www.ey.com/en_gl/technical/tax-alerts
- KPMG East Africa, “The Affordable Housing Act, 2024,” accessed 2026-06-13. https://kpmg.com/ke/en/home/insights/2024/03/the-affordable-housing-act-2024.html
- PwC, “Kenya — Individual — Other taxes” (Worldwide Tax Summaries), accessed 2026-06-13. https://taxsummaries.pwc.com/kenya/individual/other-taxes
- Kenya Revenue Authority, “Collection of the Affordable Housing Levy,” accessed 2026-06-13. https://www.kra.go.ke/news-center/public-notices
Published by Outsourcing.ke.
Further Reading
- Outsourcing to Kenya — the full Kenya pillar guide
- Kenya Employment Act 2007 — wider employment-law obligations
- IDTA Requirements for Kenya — cross-border data transfer rules
- Employer of Record Kenya — EOR services for UK companies expanding to Kenya