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How Much is KES 25,000 Taxed in Kenya?

Published in Kenya Tax Calculation 3 mins read

For a monthly taxable income of KES 25,000 in Kenya, the exact amount taxed is KES 250 after accounting for the standard monthly personal relief, based on the Finance Act 2023.

It's important to clarify that this calculation assumes the "$25,000" in the question refers to KES 25,000 (Kenya Shillings), as the provided tax bands are denominated in KES and Kenyan tax laws are applied to income in Kenya Shillings.

Understanding Kenya's PAYE System

Kenya operates a Pay As You Earn (PAYE) system for income tax, where tax is deducted from an employee's salary or wages by the employer on a monthly basis. The tax calculation is progressive, meaning different portions of income are taxed at increasing rates.

Monthly Taxable Income Bands (Finance Act 2023)

The following table outlines the monthly tax bands and their corresponding rates as per the Finance Act 2023:

Monthly Taxable Income (KES) Tax Rate
0 – 24,000 10%
On the next 8,333 25%
On the next 467,667 30%
On the next 300,000 32.5%
Any amount above 800,000 35%

Calculating Tax on KES 25,000

To calculate the gross tax on a monthly taxable income of KES 25,000, we apply the progressive tax rates:

  1. First Band (0 – KES 24,000):

    • Taxed at 10%
    • Calculation: KES 24,000 * 10% = KES 2,400
  2. Second Band (On the next KES 8,333):

    • This band covers income from KES 24,001 up to KES 32,333.
    • The remaining income for KES 25,000 is: KES 25,000 - KES 24,000 = KES 1,000
    • This KES 1,000 falls within the second band and is taxed at 25%.
    • Calculation: KES 1,000 * 25% = KES 250
  3. Total Gross Tax:

    • Sum of tax from each band: KES 2,400 + KES 250 = KES 2,650

Therefore, the gross tax calculated for a monthly income of KES 25,000 is KES 2,650.

Incorporating Personal Relief

In Kenya, resident individuals are entitled to a monthly personal relief, which directly reduces the amount of tax payable. As per the Finance Act 2023, the monthly personal relief is KES 2,400.

To determine the net tax payable:

  • Gross Tax: KES 2,650
  • Less Personal Relief: KES 2,400
  • Net Tax Payable: KES 2,650 - KES 2,400 = KES 250

This means that an individual earning a monthly taxable income of KES 25,000 would effectively pay KES 250 in income tax.

Key Considerations for Taxpayers

  • Taxable Income: The tax calculation is based on taxable income, which is gross income minus any allowable deductions (e.g., approved pension contributions, certain insurance premiums).
  • Other Statutory Deductions: Besides PAYE, employees typically have other statutory deductions such as National Social Security Fund (NSSF) and National Health Insurance Fund (NHIF) contributions. These are separate from income tax.
  • Annual Tax Returns: While PAYE is deducted monthly, individuals are also required to file annual tax returns with the Kenya Revenue Authority (KRA) to declare all their income and claim any eligible reliefs or deductions.

For more detailed information on Kenyan tax regulations, you can refer to the official KRA website.