Salary Arrears and PAYE in Kenya

Salary arrears are pay for an earlier period that is paid later. They can arise from a backdated pay rise, omitted salary or a payroll correction. They remain employment income; paying several months together does not turn them into a tax-free gift.

The PAYE calculator helps you check ordinary current monthly salary. It does not allocate a historical lump sum across tax years. Ask payroll for that allocation before using a monthly estimate to challenge an arrears deduction.

Start with the period earned

KRA's lump-sum guidance explains that employment income received in a different year from the year earned is attributed to the relevant earning year. It describes recalculating that year's taxable income and allowing for tax already paid. Its worked examples use historical figures, so copy the method only where applicable, not the old tax bands.

Separate current salary, current-year arrears and amounts earned in earlier years. Very old arrears and payments after employment has ended can engage special allocation rules. Ask payroll to identify the applicable provision and years rather than distributing every settlement equally across five years.

Build an arrears schedule

Suppose a pay rise of KES 5,000 a month takes effect from November 2025 but the November 2025 to February 2026 difference is paid in March 2026. The gross arrears total KES 20,000:

This schedule identifies when the money was earned; it is not a tax computation. Payroll still needs the relevant earnings, contribution treatment, deductions, reliefs and PAYE already accounted for. The payment date alone does not supply those inputs.

How to understand the extra tax

Request a before-and-after calculation for each affected year: original taxable income, additional taxable amount, revised tax liability, reliefs and tax already paid. A hypothetical revised liability of KES 84,000 against KES 78,000 already paid leaves KES 6,000 to reconcile. Those illustrative figures explain subtraction, not the tax due on the KES 20,000 example above.

Personal relief should not be duplicated merely because the arrears arrive as a separate transfer. Nor should the entire original tax bill be charged again without crediting the PAYE already accounted for.

Documents to request from payroll

• The pay-rise letter, award or correction explaining entitlement and effective date.
• A month-by-month gross arrears schedule.
• The tax calculation for each affected period, with rates and reliefs identified.
• The treatment of statutory contributions and any employee deductions.
• The payslip, payment confirmation and relevant P9 records, including corrections where needed.

Keep original and revised documents so the change is traceable. A bank transfer proves the amount received; it does not explain its allocation or prove that the tax calculation is correct.

What if you have already filed a return?

Compare the payroll correction with the figures previously reported before making another claim or entry. Ask payroll or KRA which return period needs correction and how the tax credit is recorded. Do not simply add the same income to both years or assume every backdated payment produces a refund.

Follow the PAYE correction checklist if the explanation is incomplete. For amounts paid on exit, separate salary arrears from the other items in the terminal-dues guide. The employment situations guide connects these different payroll events.

Sources and review date

Published and reviewed on 27 October 2026. Use the rules applicable to the period being assessed.

• KRA: current PAYE guidance and rates
• KRA: lump-sum allocation guidance (historical examples)