Here is a list of the changes to payroll after enactment of the Finance Act 2023. The effective date for these changes is 1st July 2023.
- PAYE
- Housing Fund
- Tax rate for Secondary Employees
1. PAYE:
There are two new tax bands for monthly salaries above Kshs.500,000:
- Kshs.300,000 to Kshs.500,ooo – 32.5%
- Over Kshs.800,000 – 35%
There are three tax bands for monthly salaries below Kshs.500,000 (these are the same as have been in effect since January 2021):
- Kshs.0 to Kshs.24,000 – 10%
- Kshs.24,000 to Kshs.32,333 – 25%
- Kshs.32,333 and above – 30%
- (effective July 2023, the 30% band is up to Kshs.300,000)
2. Housing Fund (HF) Levy:
Both the employee and employer will pay into the Affordable Housing kitty the following amounts every month:
- Employee – 1.5% of their Gross Salary (see 2a below). To be deducted from their salary.
- Employer – 1.5% of each employees Gross Salary (see 2a below). This is the employers expense (it is tax deductible for the employer).
2a. What is included in Gross Salary?
Gross Salary is the sum total of all cash paid to the employee plus all non-cash benefits the employee enjoys.
(See this RSM article for more details on this: RSM Guidance on the New Housing Levy 2023)
2b. How Employers will remit Housing Fund:
KRA is the collection agency for the Housing Fund.
(Click this link to see the KRA Public Notice on Collection of Housing Fund)
The KRA iTax P10 has a sheet for uploading Housing Fund details so you can upload it along with your PAYE return: Sheet M
You generate the Housing Fund Eslip using the Agency Revenue option on iTax (similar to how you do NITA).
3. Secondary Employees Tax Rate
The tax rate applicable for Secondary Employees has been increased from 30% to 35%.
(Click on this link if you need more info on Secondary Employees: Who is a Secondary Employee?)