Allowance Calculator Kenya
Calculate the tax treatment of various employment allowances in Kenya. See how taxable and non-taxable allowances affect PAYE and your net pay.
2026 Rates
Last verified: Today
Allowance Tax Treatment
How different allowances are taxed in Kenya (2026).
Non-taxable allowances
General principles
How This Allowance Calculator Works
Understanding how employment allowances affect your net pay and tax liability in Kenya
Step 1: Enter Base Salary
Input your basic gross salary (before allowances) in Kenya Shillings. This is your core salary excluding any allowances like housing, transport, or medical. The calculator uses this as the baseline for comparison.
Step 2: Add Allowance Details
Enter your allowance amount and select whether it's taxable (housing, transport, cash medical) or non-taxable (direct medical payments, meals provided on-site). The calculator automatically adjusts your taxable income based on the allowance type.
Step 3: Calculate Impact
Click "Calculate Impact" to see side-by-side comparison of your salary with and without the allowance. The calculator shows PAYE, NSSF (6%), SHIF (2.75%), Housing Levy (1.5%), and final net pay for both scenarios using 2026 Kenya tax rates.
Step 4: Compare and Optimize
Review the comparison to understand how the allowance affects your take-home pay. See the exact increase in deductions and net pay. Use this information to negotiate better compensation packages or understand your payslip better.
Understanding Your Allowance Results
What each component means and how allowances impact your take-home pay
Taxable Income Change
Shows how the allowance affects your total taxable income. Taxable allowances (housing, transport, cash medical) add to your gross salary, increasing your PAYE base. Non-taxable allowances don't affect taxable income but still increase take-home.
PAYE Impact
The difference in PAYE tax between scenarios. Taxable allowances increase PAYE because they raise your total taxable income. The increase depends on your tax bracket - higher earners pay more PAYE on allowances due to progressive taxation.
NSSF Contribution Change
NSSF is 6% of gross pensionable pay. Taxable allowances increase your NSSF contribution (capped at Tier I: KES 9,000/month, Tier II: KES 108,000/month). This reduces your net pay but increases your retirement savings.
SHIF Deduction Impact
SHIF is 2.75% of gross pay (minimum KES 300/month). Taxable allowances increase your SHIF contribution proportionally. This is tax-deductible from December 27, 2024, reducing your taxable income before PAYE calculation.
Housing Levy Change
Housing Levy is 1.5% of gross pay. Taxable allowances increase this deduction. Like SHIF, it's tax-deductible from December 27, 2024, reducing your PAYE liability while funding affordable housing initiatives.
Net Pay Increase
Your actual take-home increase after all deductions. For taxable allowances, you typically receive 60-75% as net pay (the rest goes to PAYE, NSSF, SHIF, Housing Levy). Non-taxable allowances give you 100% net increase.
When to Use This Allowance Calculator
Common situations where understanding allowance impact helps with salary negotiations and financial planning
1 Job Offer Evaluation
When comparing job offers with different salary structures. One offer might have higher basic salary, another might have more allowances. Use this calculator to see which gives you better net pay after all deductions.
2 Salary Negotiation
Before negotiating your compensation package, understand how different allowance structures affect your take-home. You can negotiate for non-taxable benefits or understand the true value of taxable allowances being offered.
3 Payslip Verification
Verify your employer is correctly calculating deductions on your allowances. Enter your basic salary and allowances to see if the PAYE, NSSF, SHIF, and Housing Levy deductions on your payslip match the calculator results.
4 Compensation Restructuring
If your employer offers to restructure your package (e.g., convert some basic salary to allowances or vice versa), use this to see the net pay impact. Understand whether the restructuring benefits or disadvantages you.
5 Allowance Optimization
Explore different allowance amounts to find the optimal compensation structure. See how adding KES 10,000, 20,000, or 30,000 in allowances affects your net pay and total deductions to make informed decisions.
6 Tax Planning
Understand your effective tax rate on allowances for year-end tax planning. See how much of your allowance goes to taxes and statutory deductions to plan your finances and budget accurately.
Official Data Sources
Our allowance calculations use official 2026 Kenya tax rates and employment regulations
- Kenya Revenue Authority (KRA) — Provides official guidance on taxable and non-taxable allowances. Cash allowances (housing, transport, medical) are fully taxable. Benefits in kind have specific treatment rules outlined in KRA guidelines.
- Income Tax Act (Cap. 470) — Governs taxation of employment income including allowances. Defines which allowances are taxable, exempt, or partially taxable. Establishes that cash allowances are generally taxable while certain benefits in kind may be exempt.
- National Social Security Fund (NSSF) — Regulates pension contributions on gross pensionable pay including taxable allowances. The 2026 rate is 6% with Tier I capped at KES 9,000/month and Tier II capped at KES 108,000/month.
- Social Health Authority (SHA) — Administers SHIF contributions at 2.75% of gross pay (minimum KES 300/month). Taxable allowances increase your SHIF base. SHIF is tax-deductible from December 27, 2024.
- Affordable Housing Act, 2024 — Establishes Housing Levy at 1.5% of gross pay. Taxable allowances increase this deduction. The levy is tax-deductible from December 27, 2024, reducing your taxable income before PAYE calculation.
- Schema Dates: . We verify our calculations against official KRA tax guidelines and Income Tax Act provisions. All calculations current for 2026.
Real-World Allowance Examples (2026)
See comprehensive net pay impact of common employment allowances in Kenya with 2026 rates
Allowances — FAQs
Common questions about allowance taxation.
Yes. House/rent allowance is fully taxable in Kenya and forms part of your gross taxable income. It increases your PAYE, NSSF, SHIF, and Housing Levy deductions.
Cash medical allowances are fully taxable. However, medical treatment costs paid directly by the employer to service providers (not cash to employee) are non-taxable benefits.
Transport allowance is fully taxable and adds to your PAYE base. For example, a KES 10,000 transport allowance on a KES 100,000 salary increases your taxable income to KES 110,000.
Most cash allowances are taxable by law. Focus on legitimate non-taxable benefits like employer-paid medical insurance, direct pension contributions, or benefits in kind rather than cash allowances.
Yes. Taxable allowances increase your gross salary, which means higher NSSF (6%), SHIF (2.75%), and Housing Levy (1.5%) deductions. Use this calculator to see the exact impact.
The effective rate depends on your salary bracket. A KES 20,000 allowance might reduce to KES 14,000 net (30% effective rate) after PAYE, NSSF, SHIF, and Housing Levy. This calculator shows your exact rate.
Cash meal allowances are taxable. However, meals provided on-site by the employer (canteen, cafeteria) of reasonable value are generally non-taxable. The key is whether it's cash or actual meals.
Taxable allowances and gross salary have the same tax treatment. Focus on total compensation and non-taxable benefits. Use this calculator to compare different package structures.
Non-taxable benefits include: direct medical treatment payments, uniforms, protective gear, specific business tools/equipment, meals provided on-site, and employer pension contributions (not cash to you).
Yes! Select "Annual" from the period dropdown and enter your annual gross salary and annual allowance amount. The calculator will show the annual impact and comparison.
Divide your net allowance increase by the gross allowance amount. For example, if a KES 20,000 allowance gives you KES 13,500 net, your effective rate is 67.5% (you keep 67.5%, lose 32.5% to deductions). This calculator shows this automatically.
No. Whether paid directly to landlord or as cash to you, housing allowance is fully taxable. The benefit is valued at fair market value and added to your taxable income. There's no legal way to make housing allowance non-taxable.
For taxable allowances, there's no difference - both are taxed the same way. Focus on total gross compensation. However, non-taxable benefits (employer-paid medical insurance, pension contributions) are better than equivalent cash allowances.
Yes. NSSF is calculated on gross pensionable pay including taxable allowances. Higher allowances mean higher NSSF contributions (6%, capped at Tier I: KES 9,000, Tier II: KES 108,000 monthly), increasing your retirement savings but reducing net pay.
Yes, cash entertainment allowances are fully taxable. However, reasonable entertainment expenses reimbursed with receipts for business purposes may be non-taxable. The key is whether it's cash allowance (taxable) or expense reimbursement (potentially non-taxable).
Taxable allowances increase your gross pay, raising SHIF (2.75%, min KES 300) and Housing Levy (1.5%) deductions proportionally. However, both are tax-deductible from Dec 27, 2024, reducing your PAYE liability.
Yes! Negotiate for employer-paid medical insurance, direct pension contributions, company car (with specific rules), or other legitimate non-taxable benefits. These give you more value than equivalent cash allowances because they're not taxed.
Use this calculator to verify your employer's calculations. Enter your basic salary and allowances - if results differ significantly from your payslip, discuss with HR. Common errors include incorrect allowance classification or wrong tax rates.
Cash car allowances are fully taxable. Company-provided cars have specific benefit-in-kind taxation rules based on vehicle value and usage (business vs personal). Consult KRA guidelines for exact treatment of company cars.
Tax rules are updated in Kenya's annual Finance Act, typically passed in July/August. Allowance taxation rules rarely change, but rates may be adjusted. We update this calculator immediately when new rates are published. Subscribe for 2027 rate alerts.