Key takeaways
- Start with gross pay, subtract NSSF, SHIF and Housing Levy to get taxable pay.
- Apply the PAYE bands: 10%, 25%, 30%, 32.5% and 35%.
- Subtract personal relief of KES 2,400 per month to get the PAYE you actually pay.
- Businesses compute VAT as output VAT minus input VAT, and turnover tax as 1.5% of gross sales.
In this guide
Understanding how to compute your taxes in Kenya helps you check your payslip, plan your budget and avoid surprises from KRA. This guide walks through PAYE for employees and the main taxes for small businesses, with worked examples.
Part 1: Computing PAYE on a salary
Step 1: Start with gross pay
Add basic salary, allowances, bonuses and taxable benefits. Example: KES 100,000.
Step 2: Subtract allowable deductions
- NSSF (employee share, 6% within the limits): KES 6,000
- SHIF (2.75% of gross): KES 2,750
- Affordable Housing Levy (1.5% of gross): KES 1,500
Taxable pay = 100,000 − 6,000 − 2,750 − 1,500 = KES 89,750.
Step 3: Apply the PAYE bands
- First 24,000 × 10% = 2,400.00
- Next 8,333 × 25% = 2,083.25
- Remaining 57,417 × 30% = 17,225.10
Tax before relief = KES 21,708.35.
Step 4: Subtract personal relief
21,708.35 − 2,400 = PAYE of KES 19,308.35.
Step 5: Work out net pay
100,000 − 6,000 − 2,750 − 1,500 − 19,308.35 = KES 70,441.65 take-home pay.
Part 2: Computing business taxes
VAT
If you sell goods worth KES 500,000 (plus 16% VAT = KES 80,000) and bought stock with KES 48,000 VAT, you pay 80,000 − 48,000 = KES 32,000 by the 20th.
Turnover tax
A shop with monthly sales of KES 300,000 pays 1.5% × 300,000 = KES 4,500.
Rental income tax
A landlord collecting KES 120,000 in residential rent pays 7.5% × 120,000 = KES 9,000.
Corporation tax
A company with taxable profit of KES 2,000,000 pays 30% = KES 600,000, less any instalment and withholding tax already paid.
Part 3: Filing your annual return
- Get your P9 form from your employer.
- Log in to iTax and choose the Income Tax – Resident Individual return.
- Enter employment income and PAYE from the P9, plus any other income.
- Claim reliefs such as insurance relief where you qualify.
- Submit by 30 June and pay any balance shown.
Figures use rates in force at the time of writing; confirm current rates on the KRA website or with a tax professional. Need a payroll system that does all this automatically? Talk to our software team or read about the types of taxes in Kenya and their deadlines.
PAYE monthly tax bands
| Monthly taxable pay (KES) | Rate |
|---|---|
| First 24,000 | 10% |
| Next 8,333 | 25% |
| Next 467,667 (up to 500,000) | 30% |
| Next 300,000 (up to 800,000) | 32.5% |
| Above 800,000 | 35% |
Quick formulas for businesses
- VAT payable = VAT on sales (16%) − VAT on purchases.
- Turnover tax = 1.5% × gross monthly sales.
- Rental income tax = 7.5% × gross monthly rent received.
- Corporation tax = 30% × taxable profit (resident companies).
Frequently asked questions
Is SHIF deductible before PAYE?
Yes. Under current rules SHIF contributions and the Affordable Housing Levy are deducted before PAYE is calculated, which lowers your taxable pay.
What is personal relief?
A fixed credit of KES 2,400 per month (KES 28,800 a year) that every resident individual deducts from their tax.
Can software calculate payroll taxes for me?
Yes. A payroll or business system applies the bands and deductions automatically and produces KRA-ready reports.
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