Every time the government changes a tax law, it either takes more from you, gives something back, or reshuffles who gets taxed and who doesn't. The Finance Bill 2026 does all three — sometimes in the same sentence.
This post covers every income tax change that affects you directly as a Kenyan: as an employee, a side-hustle runner, a gambler, a scrap dealer, or a small business owner. We'll show you what the old rule was, what the new rule says, and what it means in real life.
Most of these changes take effect on 1st July 2026. A few land on 1st January 2027. We'll flag which is which.
Let's get into it.
1. Gambling winnings are now taxable income
What changed: The Finance Bill 2026 adds "winnings" to the list of income types that attract withholding tax in Kenya. For the first time, if you win money from a licensed betting platform, lottery, or prize competition under the Gambling Control Act 2025, the platform is required to deduct tax before paying you out.
What was the rule before? The Finance Bill 2025 did not include gambling winnings as a withholding tax category. Gamblers were technically supposed to declare winnings as income, but there was no automatic deduction mechanism. This was a widely known gap in the system.
How does it work now? The tax is calculated on your net winnings — meaning the amount you actually win, minus the amount you originally staked. So if Kamau places a Ksh 500 bet and wins Ksh 8,000, the taxable amount is Ksh 7,500 (the Ksh 8,000 payout minus the Ksh 500 staked). The licensed operator deducts the withholding tax before the money ever reaches Kamau's M-Pesa.
Who does this affect? Anyone who uses licensed gambling platforms — SportPesa, BetKing, Odibets, and similar operators. If you play the National Lottery, that is also included.
Important note: This only applies to licensed operators registered under the Gambling Control Act 2025. Informal gambling is unaffected, though that brings its own separate risks.
For context on what other digital money changes are coming, see Part 4: Crypto and Digital Money - KRA Is Watching.
2. Scrap metal sales — withholding tax is tightened
What changed: The Finance Bill 2026 adds "sale of scrap metal" as a new withholding tax category, sitting alongside the existing rules.
What was the rule before? The Finance Bill 2025 introduced "sale of scrap" (broadly worded) as a withholding tax category. That provision covered general scrap sales. The 2026 bill now specifically names "scrap metal" as a separate, distinct category — tightening enforcement around the metal scrap trade in particular.
What does this mean in practice? If you sell scrap metal — iron, copper wire, aluminium, steel offcuts, old machinery parts — to a licensed buyer, that buyer is now required by law to withhold tax on the payment before they give you your money. You receive your money minus the tax already sent to KRA.
This is aimed squarely at the jua kali sector and industrial scrap dealers who have operated mostly outside the tax net. Large scrap buyers are now gatekeepers of tax collection.
Does this affect small-scale collectors? Yes, if you are selling to a licensed buyer. The obligation to withhold sits with the buyer, not the seller. But you will feel it in your pocket — the payout you receive will be lower than the agreed price.
3. Employer meals at work: no longer a taxable benefit
What changed: The Finance Bill 2026 removes employer-provided canteen meals from the list of taxable employment benefits. If your employer provides meals at a canteen or cafeteria — whether on company premises or at a registered third-party location — the value of those meals will no longer be added to your taxable income.
What was the rule before? Under the old rules, any benefit an employer provided to an employee was generally considered part of taxable income. Meals at work fell under "fringe benefits" and were supposed to be declared and taxed accordingly. In practice, many employers and employees ignored this. The 2026 bill resolves the ambiguity by simply removing meals from the taxable benefit calculation altogether.
Real-life example: Fatuma works at a factory in Athi River. Her employer runs a staff canteen where she eats breakfast and lunch daily. Under the previous rules, the value of those meals was technically a fringe benefit — meaning her taxable income was slightly higher. From 1st July 2026, those meals are simply not counted. Fatuma's PAYE goes down slightly, even if her salary stays the same.
Does this apply to every workplace? The exemption applies where meals are served in a canteen or cafeteria that is either operated by the employer or by a third party who is a registered taxpayer. Expensive restaurant lunches or meal allowances paid in cash are a different matter — those are still taxable.
4. Gratuity relief for long-service contracts
What changed: The Finance Bill 2026 creates a new tax exemption for employer contributions to a gratuity fund on behalf of an employee. If you are on a formal employment contract of at least three continuous years, contributions your employer makes to a gratuity scheme in your name will not be treated as taxable income — as long as they do not exceed 31% of your basic salary.
What was the rule before? Employer gratuity contributions were treated as part of your employment income and taxed accordingly. This new provision carves out a specific relief, recognising long-service gratuity as a retirement-adjacent benefit rather than ordinary income.
Who benefits? Employees on longer-term contracts — particularly in the formal sector, NGOs, and the civil service — where gratuity clauses are common. If your contract is renewed continuously for three or more years and your employer contributes to a gratuity scheme, this relief now applies to you.
The ceiling matters: The exemption only covers up to 31% of your basic salary. Anything beyond that is still taxable. And this relief does not apply if you already qualify for deductions under the pension relief provisions of the Income Tax Act (Section 22A).
5. Mortgage interest relief on CBK housing loans
What changed: The Finance Bill 2026 adds a specific deduction for employees who take loans from the Central Bank of Kenya (CBK) to construct, purchase, or improve a house that they personally occupy. The interest on such loans is deductible from your taxable income up to Ksh 360,000 per year.
What was the rule before? Kenya already had a mortgage interest relief provision for employees occupying owner-financed homes. The 2026 bill refines the language to specifically recognise CBK-advanced loans as qualifying for this relief, removing any previous ambiguity about whether loans from the central bank qualified.
Who benefits? This is a relatively narrow provision — most Kenyans take home loans through commercial banks, not the CBK. However, it matters for government employees and specific public sector workers who access CBK lending facilities. If you are in that category, up to Ksh 360,000 of your annual loan interest does not count as taxable income.
6. Your tax return deadline is getting shorter
What changed: The Finance Bill 2026 shortens the deadline for filing your annual income tax return from six months to four months after the end of your year of income.
For most Kenyans whose year of income runs January to December, this means:
| Old deadline | New deadline |
Annual income tax return | 30th June | 30th April |
Nil return (zero income) | 30th January | 30th January (unchanged) |
What was the rule before? Under the Finance Bill 2025 and the existing Income Tax Act, individuals and businesses had six months from the end of their year of income to file. That gave most people until 30th June of the following year.
Why does this matter? Missing the filing deadline attracts penalties and interest. If you currently file your KRA returns in May or June and don't adjust your habits, you will be filing late from 2027 onwards. Start thinking about wrapping up your records by March so April filing is comfortable.
Note on effective date: This change is among the sections that take effect on 1st January 2027, not 1st July 2026. You still have the six-month window for your 2026 returns — but from 2027, the clock runs shorter.
For a full picture of all the new KRA compliance deadlines and what they mean for you, see Part 7: Filing and Compliance — New KRA Deadlines.
7. Card fees and management fees: who pays withholding tax now
What changed: The Finance Bill 2026 expands the definition of "management or professional fee" to include interchange fees and merchant service fees — the charges that card networks (Visa, Mastercard, and similar) levy on transactions.
What was the rule before? Management fees and professional fees paid to service providers were already subject to withholding tax. However, the fees that banks and card networks charge merchants for processing card payments sat in a grey area. The 2026 bill removes that grey area.
What does this mean practically? If you run a business that accepts card payments, the interchange and processing fees deducted by your bank or payment processor on every transaction are now formally classified as a management fee. Depending on how this is applied in practice, it could mean new withholding tax obligations for businesses processing significant card volumes.
Who does this really affect? Mostly medium and large businesses. If you have a small kiosk with a till, your card transaction volumes are probably low enough that this barely registers. For supermarkets, fuel stations, hotels, and businesses with high card turnover, this is worth discussing with your accountant.
This topic overlaps with the digital payments and crypto coverage in Part 4: Crypto and Digital Money — KRA Is Watching.
Quick summary: what changes, when
Change | Who it affects | Effective date |
Gambling winnings taxed | Gamblers, betting platform users | 1 July 2026 |
Scrap metal withholding tax | Scrap dealers and buyers | 1 July 2026 |
Employer canteen meals exempt | Formal sector employees | 1 July 2026 |
Gratuity relief (3-yr contracts) | Long-service contract employees | 1 July 2026 |
CBK mortgage interest deduction | CBK loan holders | 1 July 2026 |
Tax return deadline: 6 → 4 months | All taxpayers | 1 January 2027 |
Card/interchange fees as mgmt fee | Businesses accepting card payments | 1 July 2026 |
What should you do before 1st July 2026?
If you gamble: Budget for the tax deduction on winnings. You will receive less than the headline payout figure. This is not a new charge — it is money that was always owed to the government. Now it is just collected automatically.
If you sell scrap metal: Confirm with your buyers whether they are a licensed buyer required to withhold. If they are, expect a deduction. If they are not licensed, you are still legally responsible for declaring the income yourself.
If you are an employee: Check whether your employer runs a canteen. If they do and have been adding meal values to your taxable benefits, raise this with HR — your PAYE should reduce from July.
If you are on a long-term contract: Ask your HR or payroll team whether your employer contributes to a gratuity fund. If they do and your contract is three years or more, the gratuity contributions should stop appearing as taxable income.
If you file your own returns: Mark 30th April 2027 in your calendar now. The 2026 returns will be due on 30th June 2027 under the old rule, but the new deadline takes effect for the 2027 tax year.
Continue reading the Finance Bill 2026 series:
- Part 1: The Big Picture - What Is the Finance Bill 2026?
- Part 3: What's Getting Cheaper - VAT and Import Fee Changes
- Part 4: Crypto and Digital Money - KRA Is Watching
- Part 5: Sin Taxes - Alcohol, Tobacco, and Excise Changes
- Part 6: Foreigners and Diaspora - The New Rental Tax
- Part 7: Filing and Compliance - New KRA Deadlines
Something in this post doesn't match what your employer or accountant told you? Drop it in the comments — tax law has nuance and we want to keep this series accurate.
