Relief for workers as Ruto declares pension and gratuity tax-exempt

Workers in both the public and private sectors will now enjoy tax exemptions on pension and gratuity payments, President William Ruto has announced.

Speaking during the 60th Labour Day celebrations at Uhuru Gardens, the President said the move recognises the service and sacrifice of senior citizens and workers, and aims to ensure retirement is met with dignity rather than distress.

To further enhance efficiency and employee benefits, employers will now be required to apply eligible tax reliefs and exemptions directly when calculating Pay As You Earn (PAYE), rather than leaving workers to claim them from the Kenya Revenue Authority.

"This will improve workers’ take-home pay and eliminate the burden of the current system," said Ruto.

In addition, small businesses will benefit from simplified tax treatment. They will now be allowed to fully deduct the cost of everyday equipment in the year of purchase, eliminating delays in accessing tax relief.

President Ruto said the reforms are part of broader efforts to stimulate economic growth, enhance efficiency and competitiveness, and expand opportunities. 

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Adding that the measures are aligned with the proposed 2025/2026 Finance Bill and are intended to offer targeted relief to workers and businesses, while supporting enterprise and productivity.