How the calculation works
Kenya's PAYE follows a fixed sequence laid out by KRA. Each step builds on the previous one, and the order matters because some deductions reduce taxable income (lowering PAYE) while others are applied as tax credits afterwards.
Step 1: Statutory deductions from gross
Three statutory deductions come straight off your gross salary every month:
- NSSF: 6% of gross up to KES 72,000 ceiling, split into Tier I (max KES 480) and Tier II (max KES 3,840). Combined employee maximum is KES 4,320.
- SHIF: 2.75% of gross, no upper cap, minimum KES 300.
- Affordable Housing Levy: 1.5% of gross, no cap.
Step 2: Allowable deductions for tax
Some contributions reduce your taxable income before PAYE is computed, even though they may also be cash outflows:
- Pension contributions, capped at KES 30,000 per month
- Mortgage interest (interest only, not principal), capped at KES 30,000 per month
- Post-retirement medical fund contributions, capped at KES 15,000 per month
Step 3: Compute PAYE on taxable income
Taxable income is your gross minus statutory deductions minus allowable deductions. PAYE applies progressively:
- 10% on the first KES 24,000
- 25% on the next KES 8,333 (24,001 to 32,333)
- 30% on the next KES 467,667 (32,334 to 500,000)
- 32.5% on the next KES 300,000 (500,001 to 800,000)
- 35% on anything above KES 800,000
Step 4: Apply tax reliefs
Two reliefs reduce the PAYE you owe:
- Personal relief: KES 2,400 per month, available to every PAYE-paying resident. Equivalent to KES 28,800 per year.
- Insurance relief: 15% of life, education, or health insurance premium, capped at KES 5,000 per month tax credit.
Step 5: Net pay
Net pay equals gross minus NSSF minus SHIF minus Housing Levy minus pension contribution minus PAYE payable. Mortgage interest and post-retirement medical contributions reduce PAYE but are paid separately, so they do not reduce your net pay directly.
What Finance Act 2025 changed
Finance Act 2025 made several changes to PAYE-adjacent rules. The headline points for most employees:
- PAYE bands themselves were unchanged from the Finance Act 2023 structure (10%, 25%, 30%, 32.5%, 35%).
- The personal relief stayed at KES 2,400 per month.
- SHIF, NSSF, and Affordable Housing Levy continued to be deductible before PAYE, locking in the savings introduced by Finance Act 2024.
- The pension deduction cap remained at KES 30,000 per month and the post-retirement medical deduction at KES 15,000.
The much-discussed parts of Finance Act 2025 were on betting (5% deposit, 5% stake, 5% withdrawal) and on certain VAT classifications, not on the PAYE structure for ordinary salaried employees.
Reading your payslip alongside this calculator
A standard Kenyan payslip lists, top to bottom: gross pay, then statutory deductions (NSSF, SHIF, Housing Levy), then PAYE, then any employer-arranged deductions (SACCO contributions, loan repayments, welfare), then net pay. If your payslip differs from this calculator, the gap is almost always the employer-arranged deductions, since those are specific to each company. Match the statutory lines first to verify the calculation, then the difference is the employer line items.
What this calculator does not handle
- Non-cash benefits like company cars, housing allowances treated as benefits, and stock options. These follow separate KRA rules.
- Backdated salary changes or leave-pay accruals.
- Withholding tax on consultancy income (treated separately from PAYE).
- Persons with disability tax exemption (PWD certificate from KRA exempts the first KES 150,000 per month, file separately).
For complex situations consult a registered tax agent. The calculator assumes a standard PAYE employee on cash salary.