• Income tax threshold to rise to 30,000 shillings per month

• Government aims to ease cost-of-living pressures and boost household income

• Fiscal impact remains uncertain amid high public debt levels

Kenya’s government is preparing a tax reform aimed at raising the income tax threshold to protect household purchasing power, President William Ruto said on February 4, 2026, during a meeting with senior members of his United Democratic Alliance (UDA) party.

To ease the cost of living for ordinary Kenyans, we plan to exempt more than 1.5 million workers earning KSh30,000 and below a month from paying income tax. For a further 500,000 earning up to KSh50,000, we are reducing the tax rate from 30 per cent to 25 per cent. pic.twitter.com/sG6bY9zDMe

— William Samoei Ruto, PhD (@WilliamsRuto) February 4, 2026

Under the proposal, workers would only be taxed on monthly earnings above 30,000 Kenyan shillings, or about $233. As a result, more than 1.5 million workers earning 30,000 shillings or less per month would be exempt from income tax. Ruto also said that for an additional 500,000 workers earning up to 50,000 shillings per month, the tax rate would be reduced from 30 % to 25 %.

A program to reduce the cost of living

The project follows an announcement made by the president in his New Year’s address on December 31, 2025, in which he said the government would roll out a poverty reduction program this year, with the stated objective of cutting the poverty rate by half.

The measure had also been formally recommended by the Kenya Bankers Association (KBA) in December 2025. The association said the reform would increase disposable income, strengthen worker empowerment, support micro, small, and medium-sized enterprises, and raise government revenue through higher consumption and investment.

Persistent challenges despite growth

Despite resilient economic growth of 4.8 % in 2025, according to the International Monetary Fund, and declining inflation, Kenya continues to face major challenges in reducing poverty. The World Bank estimates that 43.8 % of the population lived on less than $3 a day in 2025.

Raimond Molenje, chief executive of the KBA, said Kenyan workers’ purchasing power has declined sharply in recent years. He said adjusting the Pay As You Earn income tax brackets is a concrete step to restore household income, stimulate consumption, and support businesses. He added that higher take-home pay allows workers to spend, save, and invest more, strengthening the economy, improving loan repayment, and ultimately increasing public revenue.

Exemption with uncertain fiscal effects

However, the impact of exempting 1.5 million workers earning less than 30,000 shillings on state revenue remains uncertain, at a time when public finances are under pressure. The International Monetary Fund projects Kenya’s public debt at 70 % of gross domestic product.

Carelle Tahou (intern)