The Tax Laws (Amendment) Act, 2024, which took effect on 27th December 2024, has brought big changes to how salaries are taxed in Kenya. Whether you’re an employee wondering how your take-home pay will look, or an employer thinking about payroll adjustments, these changes are important to understand.
Let’s break it down so you can see exactly what this means for you.
What Employees Should Know: More Money in Your Pocket
Good news! The new tax laws are designed to ease the tax burden for employees. Here’s what will change:
1. SHIF (Health Insurance) is Now Tax-Free
If you contribute to the Statutory Health Insurance Fund (SHIF), this amount will no longer be taxed. That means a smaller portion of your salary is taxed, leaving you with a little extra at the end of the month.
2. More Pension Savings = More Tax Savings
You can now contribute up to KES 30,000 per month to your pension and have it deducted before tax. This is a great incentive to save for your retirement while enjoying lower taxes right now.
3. Non-Cash Benefits Just Got Better
If your employer provides benefits like transport or allowances, you’ll now enjoy up to KES 5,000 per month tax-free (up from KES 3,000). That’s more perks without added taxes.
4. Easier to Afford a Home
If you’re paying off a mortgage, the tax-free limit for monthly interest has increased to KES 30,000. This means you can save more money while working toward owning your home.
5. Free Meals at Work
Employers can now offer meals worth up to KES 5,000 per month tax-free. This small benefit can help you save on daily expenses, especially with the rising cost of living.
6. Better Treatment for Public Officers
If you’re a public officer, reimbursements for work-related expenses are now excluded from taxes. You no longer have to pay taxes on money refunded for official duties.
What Employers Should Know: Update Your Payroll
For employers, these changes mean one thing: it’s time to review your payroll systems. Here’s how the new rules will affect you:
- Payroll Adjustments: Update your systems to ensure SHIF, pension, and other deductions are processed correctly. Mistakes could lead to penalties.
- Competitive Benefits: With higher limits for non-cash perks and meal allowances, you can offer better employee benefits without increasing their tax burden.
- Compliance is Key: Staying up to date with these changes isn’t optional—get it wrong, and your business could face fines.
What This Means For You
For employees, these changes mean less tax and more money in your pocket each month. Whether it’s through lower taxes on SHIF and pensions or better benefits from your employer, your salary will stretch a little further.
For employers, this is an opportunity to show your employees you care by taking full advantage of the new rules. Offer perks like meal allowances or increased non-cash benefits, and you’ll keep your team happy while staying compliant with the law.
The Bottom Line
The Tax Laws (Amendment) Act, 2024 is here, and it’s changing the way salaries are taxed. These updates might seem small, but they can make a big difference in how much you take home each month and how businesses manage payroll.
If you’re an employee, look forward to a little extra relief on your payslip. If you’re an employer, it’s time to get your payroll sorted to meet the new requirements.