NAIROBI, Kenya – Parliament on Thursday 19th passed the Finance Bill 2025, paving the way for sweeping tax reforms that will affect the daily lives of millions of Kenyans.
The bill, which generated intense public debate, now awaits presidential assent—but already, the question on many people’s minds is: how does this affect me?
From paycheques to digital earnings, home construction to retirement, the Finance Bill introduces changes that touch nearly every Kenyan household.
According to the government, the bill seeks to create a more equitable tax system, boost county development, and modernize revenue collection, while responding to citizen concerns.
What’s Changing for the Mwananchi?
The most direct benefit comes for retirees: all gratuity and retirement benefits will now be tax-free, ensuring that retirees receive their full dues without deductions. Whether you worked in the private or public sector, this change protects your final payout.
Homeowners and aspiring homebuilders are also set to benefit. In a move to encourage self-built housing, mortgage tax relief will now apply even if you build your house through a Sacco or personal loan—not just via traditional mortgage providers.
For employees and civil servants, daily travel allowances (per diems) of up to Sh10,000 will now be tax-exempt, meaning more money in hand for those on official duty.
Additionally, employers are now required to apply tax reliefs automatically, eliminating the need for workers to submit claims or follow up with KRA.
Digital entrepreneurs, content creators, and crypto traders will also see relief.
The bill halves the digital asset tax from 3% to 1.5%, lowering the tax burden for those earning online.
At the same time, big tech firms like Netflix, Google, and Amazon must now pay VAT on their services offered in Kenya, a move aimed at levelling the digital playing field.
Boosting Local Economies and Communities
The Finance Bill 2025 also introduces incentives for community development.
Companies that invest in sports facilities—such as building football pitches or youth centres—can now deduct those costs from their taxes, a move expected to increase corporate support for youth programmes, especially in rural counties.
Meanwhile, the government is committing to increase county allocations to Sh415 billion, promising more funding for healthcare, roads, and agriculture at the grassroots.
There are also moves to tighten tax accountability. For instance, businesses can only carry forward losses for five years, a change aimed at preventing long-term tax avoidance.
Suppliers selling to the government will now be subject to withholding tax, requiring them to pay part of their dues upfront.
The bill aligns Kenya’s excise tax rules with those of other East African Community (EAC) countries, making it easier for Kenyan products to compete in regional markets.
Controversial Measures Rejected After Public Pressure
Notably, several highly contested proposals were dropped after public backlash.
The government backed down on a clause that would have allowed KRA to access mobile money and bank records without a court order, safeguarding the privacy of personal financial data.
Proposals to expand PAYE tax bands were also rejected, meaning no additional taxes on salaried workers. Zero-rating for essential goods like solar products and locally assembled mobile phones has been retained to support green energy and local manufacturing.
In a win for rural livelihoods, the government chose not to raise taxes on legally brewed alcohol—protecting legitimate producers while avoiding the unintended consequences of driving Kenyans toward dangerous illicit brews.
Health, Housing, and the Green Agenda
The bill provides critical funding for Universal Health Coverage (UHC) through the Social Health Insurance Fund (SHIF), promising more accessible healthcare. Meanwhile, the Affordable Housing Programme continues, aimed at creating jobs and providing low-cost homes.
To tackle climate change, green taxes targeting pollution and carbon-heavy industries have been introduced, supporting environmental sustainability while generating revenue.
Toward a Fairer, Digital Economy
The bill is also a key part of Kenya’s 2023–2027 economic strategy, which emphasizes fairness, digital transformation, and anti-corruption.
Tools like e-TIMS and digital invoicing are expected to help seal revenue leaks and reduce graft.
