Everything Kenyans need to know about 2026 Finance Bill

 Kenya's Finance Bill 2026 was published on 30th April 2026. It proposes changes to several tax laws and most provisions take effect 1st July 2026, while some kick in 1st January 2027. If passed, it will guide how KRA collects an extra KSh 201 billion in 2026/2027, with KSh 120 billion expected directly from the new measures. 391a8d63

Contents of the 2026 Finance Bill

1. PAYE & Income Tax Changes

Tax-free threshold increase: The Bill seeks to raise the tax-free income threshold from the current KSh 24,000. Proposals want the lowest PAYE band expanded from KSh 24,000 to KSh 30,000.

New PAYE bands: Introduce a 25% tax rate for monthly income between KSh 30,000 and KSh 50,000.

Top rate debate: Kenya Bankers Association and World Bank have pushed for the highest PAYE band to drop from 35% to 30%, with relief increased to KSh 3,000 to create a KSh 30,000 tax-free base. World Bank also suggested funding healthcare through the budget instead of the SHIF levy, and repealing the housing levy for low-income earners.

Impact: About 1.36 million Kenyans earn below KSh 50,000 per month and would benefit. KBA says lower bands could release KSh 28.1B to workers and create ∼36,000 jobs. 

2. New and Increased Taxes

-Smartphones: Excise duty on mobile phones and communication equipment raised from 10% to 25%. The tax will be payable when the device is first activated on a mobile network, not at import. Aims to curb smuggled and untaxed handsets.

Mitumba/ second-hand goods: Proposed 5% tax on value of imported goods at point of entry. System uses 16% VAT + 5% profit margin assumed + 30% final tax on profit. Government says it replaces multiple unclear tax demands.

Betting and gambling: Winnings explicitly listed as taxable income. 20% withholding tax on winnings retained, excluding amount originally staked.

Plastic products and fruit juices: Listed among new excise duty revisions.

Tourism, aviation, affordable housing: Bill proposes raising taxes here. 

3. VAT Changes

Zero-rated to exempt: Some goods shifting from VAT zero-rated to VAT-exempt. Concern is businesses can’t claim input VAT, which could raise consumer prices. Government says it’s to streamline VAT and close loopholes.

New exemptions: VAT exemptions added for:

    - Dialysis equipment

    - Agricultural inputs and animal feed

    - Clean energy tech: solar, electric transport

    - Phones

Duty-free allowance: Raised from US$300 to US$2,000 for returning passengers. 

4. KRA Powers & Data Privacy

Expanded data access: KRA to assess tax using employer filings, withholding declarations, eTIMS records, whistleblower reports, third-party info, and audit findings.

Concerns: Some Kenyans worry about misuse of personal financial info. Government says data protection laws remain in force and it’s to improve compliance. 

5. Other Key Proposals

Tax compliance: New rules to streamline tax compliance and administration.

Carry forward losses: Private sector wants period extended from 5 to 10 years for capital-intensive sectors.

Corporate tax: Reinstate 15% preferential rate for local vehicle assemblers and large housing developers.

Amnesty extension: Private sector wants 24-month extension to complete ADR cases.

Withholding VAT: Extend remittance to 5th of following month instead of 5 working days. 

6. Budget Context

2026/2027 budget ceiling: KSh 2.878 trillion for national government.

Allocations: Executive KSh 2.797T, Parliament KSh 50.8B, Judiciary KSh 30.4B, Counties KSh 420B equitable + KSh 75.7B for projects.

Priorities: Restructure non-viable SOEs, quarterly exchequer releases, fund ongoing Bottom-Up Economic Transformation Agenda projects, financial literacy for MSMEs/youth.