How Much Tax Should You Pay as a Kenyan Employee or Freelancer?

Ever looked at your payslip and wondered where all that money went? Or maybe you’re a freelancer who just landed a big client and the thought of KRA is giving you sleepless nights. You’re not alone. Figuring out how much tax you should be paying as a Kenyan employee or freelancer can feel like trying to understand Sheng from the 90s.

This isn’t a boring tax lecture. We’re breaking it down, Kenyan style. We’ll cover PAYE for the 9-to-5 crew, the freelance hustle tax rules, and the exact bands so you know if you’re paying too much or—crucially—too little. Let’s get your finances straight.

PAYE Explained: The Tax for Your 9-to-5 Gig

If you’re employed, your employer deducts tax from your salary every month before you even see it. This is Pay As You Earn (PAYE). It’s not one flat rate; it’s a progressive system. The more you earn, the higher the percentage you pay on each additional shilling.

Your gross salary isn’t what’s taxed first. You get a Personal Relief of Ksh 2,400 per month. Think of it as a tax-free allowance to start. Then, you subtract other allowable deductions like your NHIF and NSSF contributions.

What’s left is your taxable income. This amount is sliced into portions, and each portion is taxed at a different rate. It works like a ladder.

2024 PAYE Tax Bands (Income Tax Rates)

Here’s the current ladder. Remember, these rates apply to each portion of your income, not the whole amount.

• First Ksh 24,000: Taxed at 10%
• Next Ksh 8,333: Taxed at 25%
• Remaining Amount over Ksh 32,333: Taxed at 30%

So, if your taxable pay is Ksh 50,000, you don’t pay 30% on all of it. You pay 10% on the first 24k, 25% on the next 8,333, and 30% only on the remaining Ksh 17,667.

Freelancer Tax: Hustling for KRA (Turnover Tax & Income Tax)

You’re your own boss. No payslips, but KRA still knows. For freelancers, consultants, and small business owners, the main tax is often Turnover Tax (TOT). This is a simple tax on your total sales (turnover), not your profit.

TOT applies if your annual turnover is between Ksh 1 million and Ksh 25 million. The rate is 3% of your monthly gross sales. You file and pay it by the 20th of the following month.

If you make over Ksh 25 million annually, you graduate to the normal income tax regime (like a company). You’ll need to file annual returns showing your income minus your business expenses (like internet, a portion of rent if you work from home, transport to clients).

Pro Tip: Even if you’re on TOT, always keep receipts for your business expenses. If you have a bad month, you can opt out of TOT and file for income tax instead, where expenses matter, potentially lowering your bill. A good accountant in places like Nairobi’s Kimathi Street or online can advise on this switch.

Don’t Forget These Other Deductions

Tax isn’t the only thing coming off your income. Before you even get to PAYE, these are taken out:

• NSSF: You contribute 6% of your pensionable earnings (capped). Your employer adds 6%.
• NHIF: This is tiered. If you earn Ksh 100,000, you pay Ksh 1,700. If you earn Ksh 20,000, you pay Ksh 500. Check the latest NHIF rates on their site.
• Housing Levy: The controversial 1.5% of your gross salary, matched by your employer.

For freelancers, paying NHIF is on you. You can choose the tier. Also, consider the Personal Pension Plan contribution—you can deduct up to Ksh 20,000 per month from your taxable income if you have one. It’s a smart move.

A Kenyan-Specific Reality: M-Pesa, The Jua Kali Hustle, and KRA’s iTax

Let’s get real. The Kenyan freelance economy runs on M-Pesa. But here’s the local knowledge: consistent, large M-Pesa transactions from clients can trigger KRA’s system. They have data matching agreements with telcos. Don’t panic, but be prepared.

If you’re a jua kali artisan or a mama fua with a consistent clientele making decent money, the new KRA M-Service via USSD *572# is a game-changer. You can register, file TOT, and pay via M-Pesa without ever needing a laptop or visiting Times Tower. It’s built for our mobile-first reality.

For the more established freelancer, the iTax portal is your bible. Filing there, you’ll need a KRA PIN. The process can be frustrating during peak times (like the June deadline rush), so do it early in the month or late at night. A slow internet day during the long rains is not the day to start your tax return.

Local Pricing Context: Say you’re a freelance graphic designer in Kilimani. You charge a client Ksh 80,000 for a project. Under TOT, you owe Ksh 2,400 (3%) in tax for that invoice. Factor that into your pricing from the start. Don’t be the hustler who quotes Ksh 80k and ends up with only Ksh 77,600 before accounting for your data, power, and time.

How to Calculate What You Owe: A Simple Example

Let’s make it concrete. Meet Wanjiru, a marketing manager in Nairobi earning a gross salary of Ksh 150,000 per month.

1. Step 1: Less Allowable Deductions. She subtracts NHIF (Ksh 1,700) and her NSSF contribution (let’s say Ksh 1,080). Total deductions: Ksh 2,780. Her chargeable income is Ksh 147,220.
2. Step 2: Apply Personal Relief. Subtract Ksh 2,400. Taxable income = Ksh 144,820.
3. Step 3: Apply the Tax Bands.
   • First 24,000 @10% = Ksh 2,400
   • Next 8,333 @25% = Ksh 2,083.25
   • Remaining (144,820 – 32,333 = 112,487) @30% = Ksh 33,746.10
4. Step 4: Total Monthly PAYE. 2,400 + 2,083.25 + 33,746.10 = Ksh 38,229.35.

Her net take-home will be: Gross (150,000) minus NHIF/NSSF (2,780) minus PAYE (38,229.35) minus Housing Levy (2,250) = roughly Ksh 106,740.65. See where the money goes?

Common Mistakes That Will Get You in Trouble with KRA

Avoid these pitfalls, especially as a freelancer:

• Ignoring It: Hoping KRA won’t find you is a strategy that ends with penalties and accrued interest. They will.
• Mixing Money: Using the same M-Pesa or bank account for business and personal expenses. Open a separate business account, even a simple one.
• Not Filing Because You Had a Loss: You must still file a nil return by the deadline (30th June each year). A nil return is a return.
• Forgetting Advance Tax: If you win a tender or big contract, you may need to pay Advance Tax. Your client might deduct it.

Your Action Plan: What to Do Today

Don’t just read and worry. Act.

1. Check Your Payslip: Understand every deduction this month.
2. Register if You’re Hustling: Go to *572# or iTax and get a PIN if you don’t have one.
3. Start Tracking: Use a simple notebook or a free app to note every business expense and income.
4. Consult: For complex situations, invest in a one-off consultation with a tax agent (they’re licensed by KRA). It’s cheaper than a penalty.

Knowing how much tax you should be paying as a Kenyan employee or freelancer is the first step to financial peace of mind. It stops the fear and lets you plan. For employees, it’s about understanding your payslip. For freelancers, it’s about building tax into your prices and staying compliant without stress.

The system is built for compliance, but with a little knowledge, you can navigate it on your terms. Get your records straight, use the mobile tools provided, and file on time. Your future self will thank you when you need a loan, want to buy land, or just sleep soundly knowing you’re square with the system.