Key Tax Changes in the Finance Bill 2025

The Finance Bill 2025, recently approved by Kenya’s Cabinet, marks a strategic shift in the country’s fiscal approach—focusing on easing the tax burden for citizens and improving efficiency in revenue collection. In a notable move, the bill introduces no new taxes, signaling the government’s intent to support economic recovery and lower the cost of living for Kenyans.

Here’s a breakdown of the key tax changes proposed in the Finance Bill 2025:

1. No New Taxes Introduced

Treasury Cabinet Secretary John Mbadi confirmed that the government has intentionally avoided introducing any new taxes in the 2025 bill. This approach is part of a wider strategy to cushion households and businesses from further financial strain amid rising living costs.

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2. Cryptocurrency Tax Slashed by Half

In a move to promote digital innovation and ease pressure on crypto investors, the bill proposes a reduction in tax on cryptocurrency transactions from 3% to 1.5%. This adjustment is expected to stimulate activity in Kenya’s growing digital economy.

3. Tax Relief for Retirees

To honor and support senior citizens, gratuity payments to retirees will now be tax-exempt. This provision recognizes retirees’ contributions to the economy and aims to boost their post-employment income security.

4. Simplified PAYE Processing

Employers will now be required to automatically apply all relevant tax reliefs and exemptions when calculating PAYE (Pay As You Earn) for employees. This streamlining is expected to reduce cases of under- or over-taxation, minimizing the need for employees to pursue refunds from the Kenya Revenue Authority (KRA).

5. Immediate Tax Deductions for Small Businesses

Small business owners will now be allowed to fully deduct the cost of everyday tools and equipment in the year of purchase. This change eliminates waiting periods for depreciation claims and boosts cash flow, particularly for micro and small enterprises.

6. Increased Tax-Free Travel Allowances

Private sector employees will benefit from a fivefold increase in non-taxable per diem allowances, which will rise from Ksh2,000 to Ksh10,000. This revision recognizes the rising cost of work-related travel and aims to ease financial pressure on mobile professionals.

7. Overhaul of Tax Administration

To enhance compliance and efficiency, the bill introduces amendments across several key tax laws—including the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act. These reforms are designed to speed up tax refunds, close legal loopholes, and reduce disputes, ensuring smoother interaction between taxpayers and the KRA.

Download: finance-bill-2025

Conclusion

The Finance Bill 2025 represents a thoughtful balance between economic relief and administrative reform. By avoiding new taxes and instead fine-tuning existing systems, the government demonstrates its focus on fiscal responsibility, pro-growth policies, and taxpayer-centered governance.