Business 22 April 2026 Daily Monitor (Uganda)
Uganda's PAYE Tax: Highest Rates in Region Amid Proposed Threshold Hike
Uganda's PAYE tax reaches up to 40%, the steepest in East Africa, outpacing Kenya's 35% and the 30% rates in Tanzania, Rwanda, and Burundi. Proposed changes for 2026/27 would raise the tax-free threshold to Shs335,000 while introducing new bands, offering limited relief amid rising living costs. Source: https://www.monitor.co.ug/uganda/business/finance/paye-the-tax-that-eats-into-your-salary-5432556
Pay As You Earn (PAYE) deductions significantly cut into salaried workers’ income in Uganda, with rates hitting 30-40% for formal employees before pay hits their accounts. Employers must withhold and remit these taxes to the Uganda Revenue Authority by the 15th of each month, covering salaries, bonuses, allowances, and benefits above the current Shs235,000 tax-free threshold.
Under current rules, earnings up to Shs235,000 escape tax, but proposed 2026/27 amendments would lift this to Shs335,000 at 0%. New bands include 20% on Shs335,001-Shs410,000, 25% on Shs410,001-Shs485,000, 30% up to Shs10 million, and 40% beyond that.
Experts view the hike as a step toward equity but insufficient against 74% inflation since 2012, when brackets last adjusted. Inflation-adjusted figures suggest the tax-free limit should reach Shs408,500 and the top rate apply above Shs17.4 million, per BDO East Africa and SM & Co. Advocates.
PwC Uganda’s Trevor Bwanika Lukanga notes low earners gain more take-home pay, boosting consumption and easing inequality, while middle earners see 25% relief on certain bands. Yet Uganda’s 40% top rate kicks in earliest regionally—Shs10 million versus Kenya’s Shs22 million for 35%—curtailing disposable income and household spending on essentials like education and healthcare.
The changes inject about Shs96 billion in relief, aiding small businesses via higher demand, says FSME’s John Kakungulu Walugembe. Policy expert Julius Mukunda highlights correction of ‘bracket creep’ from unadjusted thresholds, though CSBAG warns of offsets from rising indirect taxes like sugar and fuel duties.
Tax Justice Alliance Uganda welcomes the progressive shift but cautions impacts remain modest given high living costs.
Source: Daily Monitor (Uganda)