Managing payroll can be one of the most challenging aspects of running a business in Kenya. One area where many employers struggle is Pay As You Earn (PAYE) — the tax deducted from employees’ salaries and remitted to the Kenya Revenue Authority (KRA).
With frequent updates to tax bands, reliefs, and compliance requirements, it’s crucial for employers to stay current. This guide will walk you through everything you need to know about PAYE in Kenya for 2025.
What is PAYE?
PAYE (Pay As You Earn) is a method of collecting income tax from employees’ wages and salaries. Employers act as tax agents by deducting tax before paying employees and remitting it to KRA.
In short: if you employ staff, you are legally required to deduct PAYE every month.
PAYE Tax Bands for 2025
As of 2025, the graduated PAYE rates in Kenya are as follows:
Up to KSh 24,000 → 10%
KSh 24,001 – 32,333 → 25%
Above KSh 32,333 → 30%
Personal Relief (2025): KSh 2,400 per month.
Insurance Relief: 15% of insurance premiums (capped).
⚠️ Note: Always confirm with KRA for updates since tax bands may be revised in Finance Acts.
Step-by-Step: How to Calculate PAYE in 2025
Let’s use an example of an employee earning KSh 50,000 gross salary:
Gross Salary → KSh 50,000
Less Pension Contribution (NSSF Tier I & II) → e.g., KSh 2,160
New NSSF Act requires contributions of 6% up to capped limits.
Taxable Income = KSh 47,840
Apply PAYE Bands:
First 24,000 @10% = 2,400
Next 8,333 @25% = 2,083
Remaining 15,507 @30% = 4,652
Gross Tax = 9,135
Less Personal Relief = 2,400
Net PAYE Payable = KSh 6,735
The employer must remit this to KRA by the 9th of the following month.
Employer’s Obligations
✔️ Register for PAYE on the KRA iTax portal
✔️ Deduct PAYE monthly from employees’ salaries
✔️ Remit deductions to KRA before the 9th of the next month
✔️ File PAYE returns via iTax
✔️ Maintain proper payroll records for audit and compliance
Failure to comply attracts penalties and interest.
Common Mistakes Employers Make with PAYE
Failing to deduct PAYE for casual workers or interns (if they meet the threshold)
Missing the 9th deadline for remittance
Incorrect calculation of tax bands and reliefs
Not updating payroll when tax laws change
Frequently Asked Questions (FAQs)
Q1. Do I deduct PAYE for employees earning below KSh 24,000?
➡️ No. Employees below the lowest band and with relief may not pay PAYE.
Q2. How do I file PAYE returns?
➡️ Log into the KRA iTax portal, go to “PAYE,” fill the return, and upload your payroll file.
Q3. What is the penalty for late filing?
➡️ A penalty of KSh 10,000 or 25% of the tax due (whichever is higher), plus monthly interest.
Downloadable Checklist: PAYE Compliance for Employers in 2025
Register for PAYE on iTax
Deduct PAYE from all qualifying employees
Apply correct reliefs (personal, insurance, etc.)
Remit to KRA by 9th of the next month
File PAYE returns monthly
Keep payroll and deduction records
👉 Download the FREE PDF Checklist here: [Insert Link]
Final Thoughts
PAYE compliance may look complicated, but once your payroll system is set up correctly, it becomes routine. The key is accuracy, timely filing, and staying updated on changes to tax laws.
At Mwirigi Tax Consultants, we help businesses streamline payroll, calculate PAYE correctly, and remain compliant with KRA.
👉 Need PAYE help for your business? Contact us today for expert payroll and tax compliance services.
