Direct answer
SHA is deducted before PAYE in Kenya, from January 2025 onwards. The Tax Laws (Amendment) Act 2024, gazetted and effective from 27 December 2024, amended the Income Tax Act to make the Social Health Insurance Fund (SHIF) contribution an allowable deduction against taxable income [Source 1]. Practically, that means SHIF, like NSSF and registered pension, sits above the PAYE line on the payslip.
This is a real change from NHIF. NHIF was not an allowable deduction. It was deducted from net pay, after PAYE had already been computed on the pre-NHIF gross. Payslips issued before 27 December 2024 showed that ordering. Payslips issued from January 2025 should show the new ordering.
Worked example: KES 80,000 gross salary
Take a typical Kenyan salaried employee on KES 80,000 gross in 2026, with no separate pension contribution and NSSF at the current Tier I + II combined employee share. Correct ordering on a 2026 payslip:
| Line | Amount (KES) | Running taxable base |
|---|---|---|
| Gross salary | 80,000 | 80,000 |
| Less NSSF Tier I + II (employee share, indicative) | 4,320 | 75,680 |
| Less SHIF (2.75% of gross) | 2,200 | 73,480 |
| Less Affordable Housing Levy (1.5% of gross) | 1,200 | 72,280 |
| Less registered pension (if any) | 0 | 72,280 |
| Taxable pay | 72,280 | 72,280 |
| PAYE (per KRA bands, less personal relief) | computed on 72,280 | - |
Under the old NHIF ordering, SHIF would have sat below PAYE. PAYE would have been computed on KES 74,480 instead of KES 72,280. The PAYE-on-the-difference (KES 2,200) at the 30% marginal band is roughly KES 660. That is the monthly tax saving from the ordering change on this salary.
Note that this saving does not fully offset the higher SHIF contribution versus the old NHIF. On KES 80,000 NHIF was KES 1,700; SHIF is KES 2,200. The employee pays KES 500 more into health, then recovers roughly KES 660 in PAYE relief. Net-net that specific worker is slightly ahead in the short run. Higher earners are not, because the SHIF increase over the NHIF cap swamps the tax relief.
For a worked comparison across the salary distribution, see how much is SHA per month and SHA vs NHIF: what changed. Or model your own salary with the SHA contribution calculator.
The legal basis, in one paragraph
The Tax Laws (Amendment) Act 2024 was gazetted on 11 December 2024 and took effect on 27 December 2024. Among other changes to the Income Tax Act, it added SHIF contributions to the list of allowable deductions against taxable income, joining NSSF contributions, contributions to registered retirement benefit schemes, and mortgage interest (subject to caps) [Source 1]. This puts SHIF in the same category of pre-PAYE deductions as NSSF and pension, which is why it now sits above the PAYE line on a payslip.
What employers must do
If a payroll is still deducting SHIF from net pay after computing PAYE, PAYE is being over-collected and the employee's net is understated. Corrections should be applied prospectively via the correct ordering on the next payroll run, with historic under-payments to the employee reconciled through payroll adjustment. For the full employer perspective, see SHA for employers.
Why this is still confusing in 2026
Three reasons a lot of online content still gets this wrong.
- NHIF muscle memory. For years NHIF sat below the PAYE line. Any article written before December 2024 that has not been updated repeats the old order.
- Rollout in two stages. The Social Health Insurance Act 2023 came into force on 1 October 2024, meaning SHIF replaced NHIF from that date. But the tax treatment was not amended until 27 December 2024. In that three-month window between 1 October and 27 December 2024, SHIF was deducted (as SHA), but was not yet an allowable deduction. Articles written in that window may describe SHIF as after-tax, and be correct for that specific period only.
- Payroll software lag. Some smaller Kenyan payroll systems did not push the reconfiguration update in time, so early-2025 payslips carried the wrong ordering. That produced payslip screenshots on social media showing SHIF below PAYE, which then got shared as if it were the current rule.
From January 2025 forward, on a correctly configured 2026 payslip, SHIF sits above the PAYE line.
The full list of pre-PAYE items in 2026
For clarity, in the correct 2026 Kenyan payslip order, the following are all deducted from gross before PAYE is computed:
- NSSF (employee share, Tier I + II)
- SHIF (2.75%)
- Affordable Housing Levy (1.5%)
- Contributions to a registered pension or retirement benefits scheme (up to statutory cap)
- Owner-occupier mortgage interest (up to statutory cap)
Personal relief and insurance relief still apply against PAYE itself, not against the taxable base.
Related SHA guides
- SHA contribution calculator
- SHA paybill (200222) reference
- How much is SHA per month?
- SHA vs NHIF: what changed
- SHA for employers
- SHA payment not reflecting: what to do
- SHA means testing explained
- SHA for the unemployed
- SHA for the informal sector and self-employed
- SHA minimum contribution (KES 300)
- SHA household coverage
Sources
- Tax Laws (Amendment) Act 2024, gazetted 11 December 2024, effective 27 December 2024. Amended the Income Tax Act to add SHIF contributions to allowable deductions against taxable income.
- Social Health Insurance Act 2023, in force 1 October 2024. Establishes the 2.75% SHIF contribution.
- SHA premium rates: sha.go.ke/premium-rates, accessed 26 August 2026.
- KRA PAYE bands and Affordable Housing Levy (1.5%) via published KRA guidance for the 2026 tax year.
- NSSF Tier I + II employee shares per the NSSF Act 2013 as in force in 2026 (figures indicative for the worked example above).