Kenya’s 2025/2026 budget, projected at KSh 4.26 trillion, presents a range of tax proposals and reforms as outlined in the Finance Bill 2025.
When will John Mbadi present the 2025/2026 budget?
On Thursday, June 12, 2025, Treasury Cabinet Secretary (CS) John Mbadi will formally unveil his first national budget statement for the 2025/2026 fiscal year.
This will mark a major milestone for Mbadi, who was appointed Treasury boss in July 2024.
Treasury announced in a public notice that the CS will present the budget statement in Parliament at 3 pm.
As the much-anticipated budget is read, the government is under increasing pressure to address urgent economic challenges, including the cost of living crisis that affects millions of Kenyans, high unemployment, and growing public debt
What are the proposed taxes in the Finance Bill 2025?
1.Tax reliefs
Before calculating Pay as You Earn (PAYE), employers must apply all relevant deductions, reliefs, and exemptions, according to the proposed amendments to the Income Tax Act in the Finance Bill 2025.
The State House clarified in a statement on Tuesday, April 29, that the move is intended to guarantee that employees receive all applicable tax benefits up front rather than requesting reimbursements from the Kenya Revenue Authority (KRA) afterwards.
“Since many employers do not offer these reliefs, workers are currently compelled to ask the Kenya Revenue Authority for refunds,” the Cabinet despatch stated.
2. Tax Procedures Act
The bill suggests amending the Tax Procedures Act’s section 59A (1B). The KRA will be able to access both customer and company data if it passes.
3. Zero-rated to tax-exempt schedule
Mbadi also suggested changes to the Value Added Tax (VAT) schedule. The aim is to make some goods tax-exempt, meaning that VAT will not be claimed, instead of being zero-rated.
These include the delivery of locally made or assembled mobile phones and the transportation of sugarcane from farms to factories. Sugarcane farmers will be hit in the next financial year.
4. Exemption of pension from tax
To increase retirees’ income, the Finance Bill 2025 has proposed to exclude pensions from taxes.
It also seeks to provide superior court judges with a distinct pension and retirement benefits framework, shifting them from the main Pensions Act.
5. Allowances
The bill suggests raising the tax-free daily limit for private sector workers travelling on official business outside of their regular place of employment from KSh 2,000 to KSh 10,000 for subsistence, travel, entertainment, or other allowances.
Will unga and bread be taxed?
In a similar development, Mbadi denied rumours that the Finance Bill 2025 would raise taxes on staple foods. He explained that there are no plans to tax bread, milk, or unga (maize flour) under the bill, which is currently open for public participation. The CS maintained that the bill is people-friendly.
