Finance Bill 2026: what changes for income tax in Kenya

The Finance Bill 2026 was published on May 5 and it contains proposals that will affect the Income Tax Act among other taxes. Here are the three changes that matter most for salaried Kenyans and the teams that pay them.

The Kshs 30,000 PAYE exemption did not make the cut

For weeks there was speculation that PAYE would be reduced by exempting the first Kshs 30,000 of monthly income for salaried Kenyans. It is now confirmed that this proposal has not been included in the Finance Bill 2026.

No explanation has been given so far, which is notable given that the proposal had backing from the president and from members of the National Assembly's finance committee.

Our reading is that exempting a significant portion of the workforce from income tax would reduce the revenue government collects through PAYE, and that this would create short-term fiscal pressure. That pressure is the most likely reason the proposal was left out.

The annual return filing deadline moves from June to April

There is a notable proposal to bring the annual tax return filing deadline forward by two months. The Finance Bill 2026 seeks to amend Section 52 of the Income Tax Act by replacing the wording in subsections (i) and (ii) of Section 52(1).

The current wording sets filing at "not later than the last day of the sixth month." The new wording sets it at "by the last day of the fourth month following the end of the person's year of income."

In practice, that shifts the deadline from June to April. Anyone used to filing in the run-up to June will need to plan for an earlier close.

Nil returns get a tighter window

The bill also changes the timeline for nil returns. Under the proposal, employees filing nil returns will have to submit them within one month after the end of the financial year.

This is a tighter window than the current rule, which lets employees file nil returns any time up to the last day of the sixth month.

If you handle payroll across a team, these changes are worth tracking early. An earlier filing deadline and a shorter nil-return window both mean less room to catch up at the last minute.

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