Payee Calculator Kenya: 2026 Net Pay & Statutory Tax Guide
Payee calculator users in Kenya must now navigate the most significant payroll shift in a decade. As of January 2026, the Finance Act 2025 has fully integrated the Social Health Insurance Fund (SHIF) and Affordable Housing Levy (AHL) as allowable deductions. This means your taxable income is calculated only after these are removed, directly increasing your take-home pay compared to the 2024 regime. Whether you are an HR professional or a salaried employee, understanding these KRA tax bands 2026 is essential for maintaining strict payroll compliance and financial planning.
1. Understanding the 2026 Payee Calculator Logic
In previous years, calculating taxes was simpler. However, in 2026, a professional payee calculator must perform “pre-tax subtractions.” Under current Kenyan law, statutory contributions like SHIF and the Housing Levy are no longer just “reliefs” given at the end; they are subtracted from your Gross Salary first.
This technical change is beneficial for the taxpayer. By reducing your “Taxable Pay” upfront, you fall into a lower tax bracket calculation, effectively paying less PAYE than you would have under the old rules for the same gross salary. This is a critical update that outranks legacy tools that still use the 2023 formula.
KRA Tax Bands 2026 (Monthly Rates)
| Taxable Income Band (KES) | Tax Rate |
| On the first 24,000 | 10% |
| On the next 8,333 | 25% |
| On the next 467,667 | 30% |
| On the next 300,000 | 32.5% |
| On all income above 800,000 | 35% |
2. Mandatory SHIF Deductions and AHL
A primary feature of a modern payee calculator is the handling of SHIF deductions. In 2026, the rate is fixed at 2.75% of Gross Salary. Unlike the old NHIF, SHIF is “allowable,” meaning it reduces the amount of your salary that KRA can tax.
Similarly, the 1.5% Housing Levy is matched by the employer, but for the employee, it is a crucial deduction that must be factored in before the PAYE bands are applied. If you fail to subtract these before calculating tax, you will overpay the Kenya Revenue Authority (KRA), leading to unnecessary losses for your business or personal income. Our tool automates this subtraction to ensure you never pay a shilling more than required.
3. New NSSF Rates 2026 (The February Update)
The biggest change this year occurs on February 1, 2026, when NSSF enters its 4th implementation phase. Any payee calculator that hasn’t been updated for these new limits will provide incorrect data.
- Lower Earnings Limit (LEL): KES 9,000
- Upper Earnings Limit (UEL): KES 108,000
- Employee Max Contribution: KES 6,480 (6% of UEL)
This increase in the UEL means that high earners will see a larger portion of their salary go toward pension, but since NSSF is also tax-deductible, it further reduces the PAYE burden. This “Tiered” logic is what sets a premium payee calculator apart from a basic spreadsheet.
4. How to Calculate Net Pay in Kenya (Step-by-Step)
To ensure your manual calculations match our payee calculator, follow this professional sequence:
- Identify Gross Salary: Sum of basic pay and all taxable allowances.
- Subtract Statutory Deductions: Deduct NSSF (Year 4 rates), SHIF (2.75%), and Housing Levy (1.5%). This gives you your Taxable Income.
- Apply Tax Bands: Use the 10% to 35% bands on the taxable income.
- Subtract Personal Relief: Deduct the standard KES 2,400 monthly relief from the resulting tax.
- Calculate Net Pay: Gross Salary minus all deductions (NSSF + SHIF + AHL + Net PAYE).
Worked Example: Salary of KES 150,000
Using our payee calculator logic for February 2026:
- Gross Salary: KES 150,000
- NSSF (New Max): KES 6,480
- SHIF (2.75%): KES 4,125
- Housing Levy (1.5%): KES 2,250
- Taxable Pay: KES 137,145
- Net PAYE (After Relief): KES 31,127
- Net Take-Home Pay: KES 106,018
5. Frequently Asked Questions (FAQ)
Is SHIF mandatory for everyone?
Yes, every salaried Kenyan must contribute 2.75% of their gross income to the Social Health Insurance Fund. Our payee calculator automatically computes this regardless of salary size.
Can I use this payee calculator for part-time employees?
Yes, but ensure you prorate the tax bands if the employee worked for less than a full month, as KRA rules for “secondary employment” may apply.
What is the penalty for late PAYE filing?
Filing after the 9th of the month attracts a KES 10,000 penalty or 5% of the tax due, whichever is higher. Using a reliable payee calculator ensures your figures are ready before the deadline.
Compliance Note for 2026
As a local compliance partner, I recommend that all small business owners generate their iTax P10 files early. In 2026, KRA’s systems are fully integrated with eTIMS. This means any discrepancy between your declared payroll and your business expenses will trigger an automatic audit. Avoid these “Red Flags” by using a verified payee calculator to cross-check every cent.
