Finance Bill 2026: how Uganda's new PAYE brackets affect your pay

As part of its 2026/2027 budget, Uganda is considering several reforms to its income tax brackets. The proposals are aimed at offering relief to lower income earners. The last time Uganda made a major revision to its income tax brackets was in 2012, so this is the first significant change in over a decade.

Here is how the PAYE computation would be affected.

The tax-free threshold rises to UGX 335,000

Currently the tax-free threshold is set at UGX 235,000. Under the proposal it rises to UGX 335,000. Employees earning below UGX 335,000 will not be required to pay any income tax.

That is an extra UGX 100,000 of monthly income shielded from PAYE, and it is the change that does the most for the lowest earners.

A new 25% band reshapes the brackets

There will also be new tax brackets. Previously, income tax was computed on cumulative rates of 10%, 20%, 30% and 40%. The new brackets will be 20%, 25%, 30% and 40%.

The key addition is the 25% band, which sits between the lower and upper brackets. It acts as a soft transition for middle income earners, smoothing the jump that used to happen between bands.

What it looks like in practice

Take an employee earning UGX 3,568,000 a month. Under the current rules, the PAYE comes to UGX 972,400. Under the new rules, it comes to UGX 958,650.

That is a reduction of UGX 13,750 a month.

The new rates offer relief for most Ugandans, though for higher earners the change is modest and unlikely to noticeably shift their lifestyle. The clearest winners are those at the bottom of the scale: anyone earning below the new UGX 335,000 threshold now pays no income tax at all, and that is the central aim of the reforms.

If you run payroll in Uganda, these changes mean your PAYE tables will need updating once the budget is passed. It is worth preparing the new brackets early so the first affected payroll run is clean.

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