Finance Bill 2026: Here Is What Is Getting Cheaper for Every Kenyan

After two years of Finance Bills that mostly asked Kenyans to give more, the 2026 bill arrives with a surprisingly long list of things that should cost less starting 1st July 2026.

This post covers every VAT exemption, import fee removal, and levy cut in the Finance Bill 2026 that directly translates into lower prices for ordinary Kenyans. We have read both the 2025 and 2026 Finance Bills line by line, so nothing here is guesswork.

Let's start with the one everybody is going to be talking about.

1. Mobile phones: you're about to pay less

What changed: From 1st July 2026, the supply of mobile phones — whether imported or locally purchased — is exempt from VAT. On top of that, mobile phones are also removed from the Import Declaration Fee (IDFee) list, meaning importers no longer pay that fee on phones brought into the country.

What was the rule before? Under the 2025 regime, phones attracted VAT at 16% as a standard taxable supply. There was no VAT exemption for handsets at any price point. The IDFee was also charged on imported phones.

The full picture: It is important to be clear here — phones are not completely tax-free under the 2026 bill. Excise duty still applies at 25% of the excisable value, and the 2026 bill actually clarifies that this excise duty is now payable at the time of activation of the phone rather than at import. This is a shift in when the tax is collected, not a removal of the tax.

What this means practically: removing VAT (16%) and the IDFee is still significant relief. A phone that costs Ksh 20,000 today under the full tax load could reasonably land at a lower shelf price after July. How much lower will depend on whether importers and retailers pass the saving on — which is something to watch.

Note: This is one of several changes to the excise and import tax regime. The tobacco, alcohol, and other excise changes are covered in Part 5: Sin Taxes - Alcohol, Tobacco and Excise Changes.

2. Boda boda motorcycles: a major win for riders

What changed: The supply of motorcycles of tariff heading 8711.60.00 is now VAT exempt.

What was the rule before? Motorcycles were taxable supplies attracting 16% VAT. This was baked into the purchase price every boda boda operator paid when buying a new bike — often financed through a loan, meaning they were paying interest on a tax-inflated purchase price.

Why this matters: There are an estimated 1.5 million registered boda boda operators in Kenya. A new entry-level motorbike used for commercial riding typically costs between Ksh 80,000 and Ksh 150,000. Removing VAT from that purchase is a real saving — potentially Ksh 12,000 to Ksh 24,000 per bike — at the point of purchase.

For Mwangi who is buying his first motorbike on hire purchase, a lower base price means lower monthly instalments. The 2026 bill does not say this explicitly — but that is the downstream effect of VAT exemption on a big-ticket purchase.

3. Electric bicycles and electric buses

What changed: Both electric bicycles and electric buses are now VAT exempt under the 2026 bill.

What was the rule before? Both attracted standard 16% VAT. There was no differentiated treatment for electric vehicles at this level.

Who does this affect? Electric bicycles are still a relatively niche product in Kenya, but their use is growing — especially for last-mile delivery businesses in urban areas. Electric buses affect public transport operators and, indirectly, commuters. VAT exemption on electric buses is a push by the government to incentivise the transition away from diesel matatus and buses.

If you commute on a bus route, this may not reduce your fare tomorrow. But it signals the direction the government wants the transport sector to move, and lower acquisition costs for operators eventually feed through to pricing.

4. Solar panels and lithium-ion batteries

What changed: The supply of solar and lithium-ion batteries is now VAT exempt.

What was the rule before? The Finance Bill 2025 did not include lithium-ion batteries or solar batteries in the VAT exempt list. Solar panels themselves had some existing exemption provisions, but batteries — the most expensive component of any solar system — were taxable.

Why this matters: For anyone off the grid, or anyone supplementing KPLC power with solar backup, the battery is typically 40–60% of the total system cost. A 200Ah lithium-ion battery can cost anywhere from Ksh 35,000 to Ksh 80,000 depending on the brand. Removing 16% VAT from that is a tangible reduction.

For rural households, small businesses, and schools running solar systems, this is one of the most practical savings in the entire Finance Bill 2026.

5. Bioethanol cooking stoves

What changed: Bioethanol vapour (BEV) cooking stoves — classified under HS Code 7321.12.00 — are now VAT exempt.

What was the rule before? These stoves attracted the standard 16% VAT rate.

Why this matters: Bioethanol stoves are a cleaner, safer cooking alternative to charcoal and kerosene, especially in urban settings. VAT exemption reduces the upfront cost barrier for households looking to switch. This is consistent with the government's broader push to reduce charcoal dependence and indoor air pollution.

6. Animal feed inputs: relief heading to your plate

What changed: Inputs and raw materials used for the manufacture of animal feeds — whether locally purchased or imported — are now VAT exempt, upon recommendation by the Cabinet Secretary responsible for agriculture.

What was the rule before? These inputs were taxable supplies at 16% VAT. Feed manufacturers absorbed the cost or passed it on to farmers who buy the finished feed.

The chain effect: Animal feed costs directly influence the cost of milk, eggs, chicken, pork, and other livestock products. When the cost of producing feed goes down, the price pressure on farmers eases. Whether this translates into lower supermarket prices for consumers depends on many factors, but the direction of the policy is correct.

7. Pharmaceutical manufacturing inputs

What changed: Inputs and raw materials for the manufacture of pharmaceutical products are now VAT exempt, upon recommendation by the Health Cabinet Secretary.

What was the rule before? These were standard taxable supplies.

Why this matters: Kenya has a stated goal of expanding domestic pharmaceutical manufacturing. Reducing the VAT burden on production inputs directly lowers the cost of manufacturing medicines locally. The downstream benefit — lower medicine prices — is indirect but real over time, particularly for generics.

8. Dialyzers: relief for kidney patients

What changed: Dialyzers — the filters used in kidney dialysis machines (tariff number 8421.29.00) — are now VAT exempt.

What was the rule before? Dialyzers attracted standard VAT. There was no specific exemption for these medical devices.

Who benefits? Approximately 7,000 Kenyans receive regular kidney dialysis treatment. Dialysis is one of the most expensive ongoing medical treatments available — each session requires a new dialyzer. Removing VAT from this equipment directly reduces the cost of dialysis for hospitals and ultimately for patients. This is a quiet but meaningful change in the bill.

9. Second-hand clothes (mitumba) — with one important condition

What changed: The supply of worn clothing and worn articles of tariff heading 6309 is now VAT exempt — but only for locally supplied second-hand clothing, not for imported mitumba.

What was the rule before? Second-hand clothes were taxable at standard VAT rates.

The critical distinction: The bill specifically says "other than upon importation." This means the VAT exemption applies when you buy mitumba at a market stall or local dealer, but it does NOT apply when the bales of second-hand clothing are first brought into the country from abroad. Importers of mitumba still pay VAT at the point of import. Only the local supply chain benefits.

In practice, this may marginally reduce prices at mitumba stalls if traders pass on the saving. But the import-level VAT remaining means the structural cost of getting mitumba into Kenya doesn't change.

10. Fuel levy reduction: Ksh 1.50 off every litre

What changed: The Road Maintenance Levy is reduced from Ksh 3.00 per litre to Ksh 1.50 per litre of fuel under the Road Maintenance Levy Fund Act.

What was the rule before? Ksh 3.00 per litre was levied on fuel as a road maintenance contribution.

Why this matters: Every Kenyan who pays for fuel, buys goods transported by road, or takes public transport feels fuel prices. A Ksh 1.50 reduction per litre is not dramatic, but it is a direct cost reduction that feeds into the pump price and, through transport costs, into the prices of goods across the economy. This is a modest but broadly felt benefit.

Summary: what gets cheaper from 1st July 2026

One caution before you get too excited

VAT exemptions reduce the tax a seller must charge you — but they only benefit you if the seller actually reduces their price. In a competitive market, most savings do get passed on. In concentrated markets — like phone retail — the price reduction can be slower and smaller than the tax saving implies.

Watch prices after 1st July 2026. If your phone retailer hasn't adjusted prices by August, ask why.

Continue reading the Finance Bill 2026 series:

• Part 1: The Big Picture - What Is the Finance Bill 2026?
• Part 2: Income Tax - What Changes in Your Pay and Pocket
• 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