In a move that’s sending shockwaves through the financial and employment sectors, the 2025 Finance Bill has introduced a game-changing overhaul of how travel allowances are treated under Kenya’s tax laws.
💰 Ksh. 10,000 Per Diem? Believe It!
The government is proposing a dramatic fivefold increase in the daily non-taxable allowance—from Ksh. 2,000 to a jaw-dropping Ksh. 10,000 per day! That’s right—employees traveling for work could soon pocket significantly more money, tax-free.
📜 Tax Law Shake-Up Incoming
The Bill specifically targets Section 5 of the Income Tax Act, which deals with employee earnings. This bold revision seeks to completely redefine what constitutes “taxable income” by increasing the tax-free threshold for per diem allowances. If passed, this would mark the most generous tax exemption for travel-related expenses in Kenya’s modern financial history.
🏛️ Cabinet Fast-Tracking the Bill
With the 2025/26 budget reading just weeks away, the Cabinet has already handed the Bill to Parliament, seeking rapid approval. Treasury insiders hint at a strategic play—less burden on workers, more compliance, and a cleaner system.
📉 No New Taxes After Uproar
After last year’s fiery backlash over the 2024 Finance Bill, the government has made a surprising pivot—no new taxes this time around. Instead, Treasury CS John Mbadi is rolling out a wave of reliefs, including:
- Tax cuts on digital assets (from 3% to 1.5%)
- Exemption of taxes on retiree gratuity payments
- Removal of packaging taxes on tea and coffee
💼 The Bigger Picture: Budget Trimmed, Deficit Down
The Treasury has slashed Ksh. 130 billion from the proposed budget, bringing it down from Ksh. 4.3 trillion. This has trimmed the deficit to 4.5% of GDP, a notable drop from 5.1% in the previous fiscal year.
🔍 What’s Next?
As the nation holds its breath for Parliament’s decision, one thing is clear—Kenya’s financial game is shifting, and every employee and employer needs to brace for impact.
Stay tuned. This story is developing.
