Govt Promise of Reduced PAYE Takes Shape in Finance Bill of 2026

Hello and welcome to the Money News Roundup Newsletter. Today, we’re covering the government's plan to raise the tax-free income from Ksh24,000. We also cover the assurance by the US to Kenya amid the non-NATO ally status review.

‍Govt to Review PAYE Bands 

The government is considering raising the tax-free income from the current Ksh24,000 in the 2026 Finance Bill

As reported by the Business Daily, National Assembly chair Kuria Kimani explained that the move was aimed at cushioning low-income earners.

While he did not detail what the proposed rate would be, he expressed that it was time to review the tax bands in the bill to be drafted by the National Treasury.

Similarly, the government plans to reduce the tax burden for high-income earners. Kenyans who earn between Ksh500,000 and Ksh799,000 face an income tax rate of 32%.

Kenyans who earn above Ksh800,000 face the highest tax rate of 35%.

“I think you can expect the new PAYE to reflect the new realities, for instance, the tax-free threshold of Ksh24,000 is low and can be increased so we can have a larger bracket of beneficiaries,” he stated.

US Gives Assurance to Kenya Amid Review of Non-NATO Ally Status 

The United States has reiterated that Kenya remains central to its US-Africa policy amid a review of its non-NATO ally status.

Acting US Ambassador Carla Benini made these assurances to the government during a meeting with President William Ruto at State House.

“Kenya remains central to our US-Africa policy. When we do something in Africa, we do it in Kenya first, and there is a reason for that. It is because of our shared interests and alignment on governance, rule of law, and democracy,” the Charge d'Affaires stated.

According to the Star, Ruto stated that the US-Kenya partnership was important and mutually beneficial to both countries.

The US Congress is set to review Kenya’s non-NATO status following an amendment by Senator James Risch.

‍Nairobi Hospital Suspends Price Hike for Services

Nairobi Hospital has suspended plans to increase the prices of various medical services. The decision was made after a meeting with medical insurance providers. 

Last month, the hospital increased charges by up to 61% on services such as scans, ultrasounds, and bed rates.

As indicated in the Citizen Digital, the hospital explained that it was revising the prices due to the rising operational costs and higher prices of pharmaceutical and medical supplies.

The hikes prompted Madison, First Assurance, Minet, Old Mutual, Britam, AAR, CIC, and Pacis Insurance to suspend coverage of the hospital’s services starting this week.

Govt to Address Reduction of Student Capitation - Mbadi

Treasury Cabinet Secretary John Mbadi has pledged to work with Education CS Julius Ogamba to address the school capitation crisis. 

Speaking in Nairobi during the Public Private Partnership Symposium on Monday, Mbadi said more resources are needed to meet minimum requirements under budgetary allocation policies for the education sector.

He noted that the government is reducing fees for universities and colleges from September 1, but stressed that capitation must be increased to sustain quality education. 

Mbadi said the talks with the Education Ministry aim to find lasting solutions to challenges facing institutions and ensure adequate funding for students nationwide. Read more here.

Foreign Bank Offices in Kenya See 12% Rise in Dollar Transactions

The value of business conducted by foreign bank representative offices in Kenya rose by 11.5% last year, reaching $2.9 billion (Ksh375 billion), up from $2.6 billion (Ksh336 billion)  in 2023. 

Despite the increase, the value in local currency dropped due to the Kenyan shilling’s appreciation.

In shilling terms, transactions fell from Ksh413.3 billion in 2023 to Ksh379.5 billion in 2024. This reflected the shilling’s 21% gain against the US dollar over the year.

The exchange rate moved from Ksh156.46 per dollar at the end of 2023 to Ksh129.30 in December 2024, according to the Central Bank of Kenya (CBK).

Read more here.

‍High Court Suspends Duty-Free Rice Importation

The High Court has suspended the government’s plan to import 500,000 tonnes of Grade 1 milled white rice following a petition by the Farmers Party, which argues the move will harm local farmers and traders.

As reported in the Daily Nation, Justice Edward Muriithi, sitting in Kerugoya, issued a conservatory order on Monday halting the importation pending the case’s hearing.

The order stops the implementation of gazette notices issued on July 28 by Treasury CS John Mbadi and Agriculture CS Mutahi Kagwe approving duty-free imports until December 31, 2025.

The government had approved the importation of rice to cushion consumers from high prices.