The Income Tax (Amendment) Bill, 2012 The monthly PAYE threshold has now been increased to UShs 235,000
Following persistent lobbying by the Private Sector Foundation (PSF) the government has finally agreed to increase the PAYE threshold from the current low level of UShs 130,000 per month to UShs 235,000 per month.
This is very good news to employees especially those persons who earn less than UShs 410,000 a month. This is because with effect from 1 July 2012, employees earning UShs 410,000 a month, will now be required to pay tax of only UShs 25,000 as opposed to the UShs 45,500 which they have been paying before the PAYE threshold was revised upwards.
The tax saving in percentage terms is equivalent to 45%. As the income increases, the tax savings cease to be significant compared to what the employee was paying before the increase in the PAYE threshold. For example, for an employee whose monthly income is UShs 10 million, their monthly tax saving will only be UShs 20,500. This translates in a saving of only 0.7% when you compare with the tax they were paying before the PAYE threshold was revised upwards.