Guide

How to calculate KRA tax in Kenya

PAYE, VAT, Turnover Tax, Withholding Tax and rental income tax — the current rates and the exact method, verified against KRA and the Tax Laws (Amendment) Act 2024. Most online calculators are running on outdated figures; here is what the law actually says.

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Kenyan tax changed more between 2023 and 2025 than in the previous decade. The Affordable Housing Levy arrived, NHIF became SHIF, and the Tax Laws (Amendment) Act 2024 — in force from 27 December 2024 — quietly rewrote how PAYE is computed. The result is that a great many salary and tax calculators online are now wrong, sometimes by thousands of shillings a month. This guide sets out the figures that are actually in force, and the KRA Tax Pro calculator applies them across all five major taxes.

PAYE: the order of operations matters

PAYE is charged on taxable pay, not on gross. First you subtract the allowable deductions: NSSF, SHIF (2.75% of gross), the Affordable Housing Levy (1.5% of gross), and any pension (up to KES 30,000/month), owner-occupier mortgage interest (up to KES 30,000/month) or post-retirement medical fund contributions (up to KES 15,000/month). Only then do you apply the graduated bands: 10% on the first KES 24,000, 25% to 32,333, 30% to 500,000, 32.5% to 800,000, and 35% above that. Last, you subtract the tax credits — the KES 2,400 monthly personal relief and insurance relief (15% of premiums, max KES 5,000/month). The single most common error is treating SHIF as a 15% relief; since December 2024 it is a full deduction from gross. If you are an employer, the payslip generator guide walks through the same deductions on a finished payslip.

VAT, Turnover Tax and rental income

VAT is 16% standard. The old 8% petroleum rate is gone — fuels moved to 16% on 1 July 2023. What still confuses traders is zero-rated versus exempt: zero-rated supplies (exports, bread, unprocessed milk) are taxed at 0% and the supplier can reclaim input VAT, whereas exempt supplies (financial services, insurance, education, LPG) carry no VAT and no input recovery. Turnover Tax is a flat 1.5% of gross monthly sales for resident businesses turning over between KES 1,000,000 and KES 25,000,000 a year — it does not apply to rental income, professional fees, or limited companies. Residential rental income has its own regime: 7.5% of gross rent (down from 10% since January 2024) for annual rent between KES 288,000 and KES 15,000,000, with no expenses deductible.

Withholding tax: get the residency right

Withholding tax is where the resident-versus-non-resident distinction does the most damage if you get it wrong. Management or professional fees are 5% for residents but 20% for non-residents; royalties 5% versus 20%; dividends 5% versus 15%; rent on immovable property 10% versus 30%. The Tax Laws (Amendment) Act 2024 also introduced a brand-new WHT on the supply of goods to public entities — 0.5% for residents, 5% for non-residents. Because WHT is deducted at source and remitted to KRA by the 20th, applying the wrong rate means either under-remitting (and exposure to penalties) or over-deducting from a supplier who then has to claim it back. The calculator carries the full resident and non-resident table so you can see both columns at once.

A standing caveat: tax rates change with every Finance Act, and figures here are current as of June 2025. The calculator notes the date and links its sources to KRA so you can confirm before filing. If you are weighing up a job offer or a redundancy package, the tax treatment matters as much as the headline number — see the guides on benchmarking and negotiating your salary and calculating redundancy pay.

Frequently asked questions

How is PAYE calculated in Kenya in 2025?

PAYE is charged on taxable pay, which is gross pay minus NSSF, SHIF (2.75% of gross), the Affordable Housing Levy (1.5% of gross), and any allowable pension, mortgage interest or post-retirement medical contributions. Tax is then computed on the graduated monthly bands: 10% on the first KES 24,000; 25% on 24,001–32,333; 30% on 32,334–500,000; 32.5% on 500,001–800,000; and 35% above 800,000. Finally you subtract the tax credits: personal relief of KES 2,400 per month, plus insurance relief (15% of qualifying life/health/education premiums, capped at KES 5,000 per month). The Tax Laws (Amendment) Act 2024 (in force 27 December 2024) made SHIF and the Housing Levy allowable deductions rather than reliefs — a change many older calculators still get wrong.

What is the VAT rate in Kenya, and what is the difference between zero-rated and exempt?

The standard VAT rate is 16%. There is no 8% reduced rate any more — it applied to petroleum products until 1 July 2023, when those fuels moved to 16%. The distinction that trips people up is zero-rated versus exempt. Zero-rated supplies (exports, ordinary bread, unprocessed milk) are taxable at 0%: the supplier charges no VAT but can still reclaim input VAT on costs. Exempt supplies (financial and insurance services, education, LPG/cooking gas) are outside the VAT net: no VAT is charged and the supplier cannot reclaim input VAT. Mandatory VAT registration applies once taxable supplies exceed KES 5,000,000 in any 12-month period, and VAT returns are filed monthly by the 20th.

Who pays Turnover Tax in Kenya and at what rate?

Turnover Tax (ToT) is 1.5% of gross monthly sales, charged as a final tax with no expense deductions. It applies to resident businesses (individuals, sole proprietors and partnerships) whose annual gross turnover is above KES 1,000,000 but does not exceed KES 25,000,000. Businesses below KES 1,000,000 file ordinary income tax; those above KES 25,000,000 fall under the normal corporate/VAT regime. ToT specifically excludes rental income, management or professional or training fees, income already subject to a final withholding tax, employment income, and limited companies. ToT is filed and paid monthly on iTax by the 20th of the following month.

What are the withholding tax rates in Kenya for residents and non-residents?

Withholding tax is deducted by the payer and varies sharply by payment type and by whether the payee is resident or non-resident. Common resident/non-resident pairs: dividends 5%/15% (a resident company holding 12.5%+ voting power is exempt); interest on bank deposits 15%/15%; royalties 5%/20%; management, professional or training fees 5%/20%; rent on immovable property 10%/30%; contractual fees 3%/20%; insurance commissions 5%/20%. The Tax Laws (Amendment) Act 2024 introduced a new WHT on the supply of goods to public entities at 0.5% (resident) and 5% (non-resident). WHT is remitted to KRA by the 20th of the following month, and a withholding certificate is issued to the payee via iTax.

How much tax do I pay on rental income in Kenya?

Residential rental income is taxed under the Monthly Rental Income (MRI) regime at 7.5% of gross rent — reduced from 10% effective 1 January 2024. It is a final tax charged on gross rent with no deduction for expenses, mortgage interest or losses. It applies to resident landlords whose annual residential rent is above KES 288,000 but does not exceed KES 15,000,000. Above KES 15,000,000 (or by written election to the Commissioner), rent is taxed under the normal income-tax rules instead. MRI is filed and paid on iTax by the 20th of the following month, and a nil return is required for months with no rent. Where a KRA-appointed agent withholds 10% of rent at source, that amount is credited against the landlord's MRI.

Which reliefs and deductions reduce my PAYE in Kenya?

Two things reduce PAYE, and they work differently. Allowable deductions reduce your taxable pay before the bands are applied: NSSF, SHIF, the Affordable Housing Levy, pension contributions (up to KES 30,000 per month), owner-occupier mortgage interest (up to KES 30,000 per month), and contributions to a registered post-retirement medical fund (up to KES 15,000 per month). Tax credits then reduce the tax itself: the personal relief of KES 2,400 per month that every resident employee gets, and insurance relief of 15% of qualifying life, health or education premiums, capped at KES 5,000 per month. Note that SHIF does not earn the 15% insurance relief — since 27 December 2024 it is deducted in full from gross instead, so do not count it twice.

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