KRA’s Christmas miracle: A little less tax in your stocking.

Brace yourselves Kenyan workers, your wallets are about to get a little happier! In a plot twist worthy of a financial soap opera, the Kenya Revenue Authority (KRA) has decided to stop playing double-dip with your deductions. That’s right, no more taxing the same money twice when it comes to things like the Housing Levy, SHIF, and those post-retirement medical funds.

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Well, starting December 27, 2024, that particular tax tango is coming to an end! KRA is throwing in some extra goodies, like not taxing your mortgage interest (up to Sh30,000 monthly) and pension contributions. It’s like they’re finally admitting that making you pay taxes on money you’re already contributing to these schemes is about as logical as bringing an umbrella to a swimming pool.

The real MVPs here are the highly paid employees, who’ll be doing a victory dance all the way to the bank. However, for those in the 15% PAYE bracket, the celebration might be more of a gentle head nod than a full-on party. As one KRA official put it – with all the subtlety of a tax auditor at a birthday party – the impact for lower-paid workers might be “modest or at worst negative.”

And in a classic “give with one hand, take with the other” move, they’re scrapping some old reliefs like the affordable housing relief, but hey – at least your cafeteria meals are getting an upgrade!

As Samuel Mwaura from Grant Thornton puts it, it’s meant to give workers a “soft landing.” Though in typical Kenyan fashion, this soft landing comes with enough paperwork to wallpaper your office!

Here’s what it means for you:

1. If you’re a higher-income earner paying higher PAYE rates: You’ll see more significant savings.
2. If you’re in the 15% PAYE bracket: The benefit will be smaller, and in some cases, the overall change might be minimal.
3. The affordable housing relief is being scrapped and Post-retirement medical fund relief is being eliminated.

Source; KRA.

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