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2026 KRA rates, instant
Yes. Overtime is taxable employment income in Kenya. KRA expressly includes overtime in cash pay subject to PAYE. An overtime entry is not tax-free simply because you earned it outside normal working hours or received it separately from your salary.
Use the PAYE calculator to understand the ordinary salary calculation. For overtime, compare payroll with and without the extra earnings, checking the applicable contribution bases as well as tax.
Is overtime taxed at a special rate?
There is no universal flat overtime tax rate. PAYE uses progressive income bands. The extra taxable income can fall within one band or cross a boundary. A colleague with a different salary or set of deductions may therefore keep a different proportion of the same gross overtime payment.
Older search results can be misleading: KRA's cash-allowances guidance explains that the former exemption for overtime and bonuses paid to employees in the lowest salary bracket was removed by the Finance Act 2020. A low earner may still have no PAYE after applicable relief, but that is different from overtime itself being exempt.
A worked example of the extra PAYE
Suppose monthly taxable pay, after allowable deductions, rises from KES 30,000 to KES 35,000. These are taxable-income inputs, not gross salaries. Assume a resident employee with the standard personal relief and no additional reliefs.
| Calculation | Before overtime | After overtime |
|---|---|---|
| Taxable pay | 30,000 | 35,000 |
| Tax before relief | 3,900.00 | 5,283.35 |
| Personal relief | 2,400.00 | 2,400.00 |
| PAYE | 1,500.00 | 2,883.35 |
The KES 5,000 increase in taxable pay adds KES 1,383.35 PAYE. Part falls in the 25% band and part in the 30% band. This isolates income tax; it does not establish the final cash from KES 5,000 gross overtime, because contributions can also affect taxable pay and net pay.
Check the hours before checking the tax
Separate two questions: what overtime you are owed, and what tax applies to the amount paid. Compare approved hours, the agreed hourly basis and the applicable employment terms with the gross overtime line. Tax accuracy cannot fix missing hours or an incorrect gross payment.
Keep your approved timesheet and compare it with the earnings and deductions on your payslip. Ask payroll to explain any difference before trying to reproduce its tax result.
Why the bank payment may rise by less
PAYE is only one deduction. Ask which portion of the overtime enters each statutory contribution base and whether a ceiling applies. Do not deduct every headline percentage mechanically, or claim personal relief twice because an extra payment has a separate payslip.
For the underlying sequence, read how PAYE is calculated. The employment situations guide also covers other changes to ordinary pay.
What if the overtime relates to an earlier period?
Give payroll the dates the work was performed, not just the payment date. A correction covering earlier tax years needs period-specific treatment. See salary arrears and PAYE before putting a historical lump sum into a current monthly estimate.
Sources and review date
Published and reviewed on 27 October 2026. Use the rules applicable to the period being assessed.