President William Ruto has officially signed the Finance Bill 2025 into law, marking the beginning of significant changes to Kenya’s tax regime and public spending framework for the 2025/26 financial year. This comes just a week after the National Assembly passed the bill with minimal amendments, signaling broad political support for the legislation.
Alongside the Finance Bill, President Ruto also assented to the 2025 Appropriation Bill, allowing the Treasury to draw Ksh.1.88 trillion from the Consolidated Fund. The Finance Act 2025 outlines how government revenue will be raised and spent, incorporating amendments to six key tax statutes: the Income Tax Act, Value Added Tax Act, Excise Duty Act, Tax Procedures Act, Miscellaneous Fees and Levies Act, and Stamp Duty Act.
One of the standout provisions is the automatic application of tax reliefs, deductions, and exemptions by employers on behalf of their employees. This move aims to ease the burden on salaried workers and streamline compliance.
The Act also introduces changes to housing-related reliefs. Mortgage tax benefits have been expanded to include homes financed through SACCOs and personal loans — a move intended to spur home ownership. Meanwhile, the tax deduction on retirement gratuity has been scrapped, and all pension payments, whether lump sum or instalment-based, are now fully exempt from tax.
The Pay-As-You-Earn (PAYE) tax bands remain unchanged, after a proposal to expand them was rejected to protect low- and middle-income earners from higher taxes. Additionally, the Ksh.500 excise duty per litre on Extra Neutral Alcohol for licensed spirit manufacturers was retained.
To support local industry, MPs preserved the zero-rated tax status on key commodities including mobile phones, electric bicycles, solar and lithium-ion batteries, and raw materials for animal feeds.
Notably, a Treasury proposal granting the Kenya Revenue Authority sweeping access to personal data was rejected on constitutional grounds. The Finance Committee emphasized the importance of protecting citizen privacy under Article 31 of the Constitution and the Data Protection Act.
The integration of public feedback and stakeholder engagement in finalizing the Finance Act highlights a growing commitment to participatory policy-making in Kenya.
