Finance Act 2026 for Employees: What Changed in Kenya

For most employees the Finance Act 2026 did not change the payslip: PAYE bands and the KSh 2,400 monthly personal relief are the same. What changed is around the payslip. From 1 January 2027 individual returns are due by 30 April, not 30 June. Gratuity is tax free only within new limits. KRA can send you a pre-filled return. And penalties and interest on tax owed up to 31 December 2025 are waived if you clear the principal by 31 December 2026.

What did not change

PAYE bands: still 10% to 35%. See every band on our KRA tax rates 2026 page.
Personal relief: still KSh 2,400 a month.
Your net pay: because the bands and relief are unchanged, the Act on its own does not move take-home pay. Check yours in the PAYE and net salary calculator.

When each change starts

1 July 2026: most of the Act.
1 September 2026: new export-document rule for importers.
1 January 2027: new return filing deadlines.

1. Returns due by 30 April, from 2027

KRA: from 1 January 2027, individual taxpayers file by the last day of the fourth month after the end of the year of income. Individuals use the calendar year, so that is 30 April. It covers individuals, the self-employed and partnerships. Companies still file by the end of the sixth month after their year end.

In practice the return for 2026, which you file in 2027, is due two months earlier than you are used to. Returns for 2025 were due by 30 June 2026 under the old rule. KRA's advice is to start early, confirm your employment, business and withholding figures, and review the return before you submit.

2. Gratuity: tax free only within limits

KRA: gratuity qualifies for exemption if the contract of service is for at least three continuous years (or an extension of a three-year contract) and the gratuity does not exceed 31% of the emoluments earned during that period. KRA tells employers to apply the exemption only to payments that meet both conditions.

The test is against emoluments for the contract period, not basic salary alone. If you are on a contract with a gratuity clause, ask HR how they apply it before your final payment.

3. Pre-filled returns

KRA: it may issue pre-populated returns from the information it already holds. You can confirm the return or amend it. KRA says further guidance will explain who gets one and how. Its advice: review every pre-filled figure before you submit.

4. Tax amnesty to 31 December 2026

KRA's notice says the amnesty runs from 1 July to 31 December 2026 and covers interest, penalties and fines on tax for periods up to 31 December 2025. It does not cancel the tax itself.

You owe principal tax: pay all of it by 31 December 2026. You can use a payment plan on iTax, but the full principal must still be cleared by that date.
You have unfiled returns: file them during the amnesty. Nil returns with no tax due qualify automatically for amnesty on the late filing penalty.
You owe only penalties or interest: the waiver is automatic. No application is needed.

Behind on nil returns? Our nil return guide walks through the filing.

5. When iTax is the problem

KRA: if you fail to file, pay or issue an e-invoice electronically, KRA will send a notice and consider your explanation before charging the penalty, and system errors may qualify for a waiver of penalties or interest. Keep screenshots, support ticket numbers and emails whenever iTax lets you down.

6. Deregistered PINs can be reinstated

KRA lists PIN reinstatement for deregistered persons among the Act's other changes, without more detail yet. For PIN problems today, see our KRA PIN guide.

Other changes you may notice

Excise duty on bottled water has been removed (KRA).
Fruit and vegetable juice with added sugar carries excise of KSh 20 a litre (KRA).
Betting and gaming deposits carry 5% excise duty (KRA). See our betting tax guide.
Fees charged by payment service providers for digital payment services are not exempt from VAT (KRA).
Returning residents can bring in goods worth up to USD 2,000 free of VAT (KRA).

Reported, but not on KRA's list

EY's alert on the Act (8 July 2026) describes two more changes for individuals that KRA's explainer does not mention: an income tax exemption for benefits paid on death from registered pension and provident funds, public pension schemes and NSSF, and an exemption from instalment tax for people whose only income is employment. EY also gives 23 June 2026 as the date of assent. KRA's page lists only "selected" changes and tells taxpayers to "refer to the Finance Act and subsequent official KRA guidance", so these may well be right, but we have not seen them in the Act or in KRA guidance yet. Treat them as EY's reading until KRA confirms.

Frequently asked questions

Did the Finance Act 2026 change PAYE?

No. KRA's summary of the Act lists no change to the PAYE bands or the personal relief. PAYE still runs from 10% to 35% and relief is still KSh 2,400 a month.

When is the KRA deadline from 2027?

KRA says that from 1 January 2027 individuals, the self-employed and partnerships file by the last day of the fourth month after the year of income, which is 30 April. Companies keep the end of the sixth month after their year end.

Is gratuity tax free under the Finance Act 2026?

Only if the contract of service is for at least three continuous years (or an extension of a three-year contract) and the gratuity does not exceed 31% of the emoluments earned in that period, according to KRA.

How do I qualify for the 2026 tax amnesty?

Pay any principal tax for periods up to 31 December 2025 in full by 31 December 2026, and file any missing returns for those periods. KRA then waives the penalties, interest and fines on those periods. If you owe no principal, the waiver is automatic.

Do nil filers have a different deadline?

Some news reports say nil filers must file by 31 January. KRA's Finance Act page does not say that; it gives 30 April for all individuals. Until KRA says otherwise, plan for 30 April and file early.

Sources

KRA, Finance Act 2026: What It Means for You. Read 25 October 2026.
KRA public notice, Tax Amnesty on Interest, Penalties and Fines, 7 September 2026.
KRA public notice, Filing of 2025 Income Tax Returns, 8 June 2026 (30 June 2026 deadline for 2025 returns).
EY, Kenya enacts Finance Act, 2026, 8 July 2026. Used only for the items marked as EY's.