Income tax relief offers super earners Sh668 monthly benefit

Super salary earners will get a monthly benefit of about Sh668 following the review of income tax bands and the increase in personal relief aimed at easing workers’ tax burden. The proposals seek to expand bands by 10 per cent and increase personal relief from the current Sh1,280 to Sh1,408 per month in a review which will see those earning Sh25,000 monthly gain Sh292.

Analysts say that benefits of the income tax review — the second in 12 years — will be wiped out by inflation.
Kenya’s inflation rose to 10.28 per cent year-on-year in March, its highest level since May 2012, pushed by higher food prices.

Treasury secretary Henry Rotich said the increase in tax bands was informed by the need to boost the take-home pay of low income earners. A similar review last year took effect in January and offered  workers earning more than Sh100,000 relief of about Sh600. Currently, the lowest band starts at Sh11,180 per month while the upper band includes incomes from Sh42,782. The maximum 30 per cent tax rate is applied to this band.Under the proposed changes, workers will only pay taxes if their income is at least Sh12,298 per month.

This means incomes of Sh12,298 per month will attract taxes at 10 per cent. Those earning Sh23,886 per month will attract 15 per cent taxes.

Incomes beyond the second band of up to Sh35,473 will be taxed at 20 per cent, with the rate rising to 25 per cent on incomes up to Sh47,059 per month.

Those earning above Sh47,059 fall in the upper-most band which will attract 30 per cent tax. A person earning Sh500,000 will pay Sh142, 655 in mothly income tax, down from 143,323, translating to savings of Sh668.

Those earning Sh100,000 will have a benefit of Sh668 on tax of Sh22,655. Those earning Sh50, 000 will enjoy a similar cut with a tax bill of Sh7,655.

The changes will also see personal relief, enjoyed by all workers, increase from the current flat rate of Sh1,280 per month to Sh1,408.