LEV 2
SHIF, the Affordable Housing Levy and other employer levies
1Scope and legal basis
Two statutory deductions changed the Kenyan payslip in 2023 and 2024. The Affordable Housing Act 2024, passed after the courts struck down the housing levy in the Finance Act 2023 for want of a legal framework, imposes the Affordable Housing Levy (AHL) from 19 March 2024 at 1.5% of gross salary from the employee, matched by 1.5% from the employer, and at 1.5% of gross income from every other person earning income (self-employed and business persons), collected by the KRA into the Affordable Housing Fund. The Social Health Insurance Act 2023 replaced the NHIF with the Social Health Authority and three funds from 1 October 2024, with the Social Health Insurance Fund (SHIF) contribution at 2.75% of gross salary for employees (minimum KES 300 a month) and 2.75% of household income for others as assessed by means testing, remitted to the Social Health Authority. The Tax Laws (Amendment) Act 2024 made both contributions deductible in computing taxable employment income from 27 December 2024, replacing the earlier 15% affordable housing relief and the NHIF insurance relief. Alongside them sit the older employer levies: the industrial training levy of KES 50 per employee per month under the Industrial Training Act, the tourism levy of 2% of turnover for tourism establishments under the Tourism Act, the standards levy on manufacturers, and the catering, sugar and agricultural sector levies.
2Key definitions
3Charge, computation and rates
The payroll levies side by side (2026)
| Deduction | Employee | Employer | Base | Tax treatment | Due |
|---|---|---|---|---|---|
| NSSF (LEV 1) | 6% up to KES 6,480 | 6% up to KES 6,480 | Pensionable pay to KES 108,000 | Employee share deductible within the KES 30,000 monthly pension limit; employer share a deductible expense | 9th of the following month |
| SHIF | 2.75%, minimum KES 300, no cap | Nil (employer deducts and remits only) | Gross salary | Deductible from taxable pay (since 27 December 2024); no longer a relief | 9th of the following month |
| Affordable Housing Levy | 1.5% | 1.5% | Gross salary | Employee share deductible from taxable pay (since 27 December 2024; the 15% relief was repealed); employer share a deductible expense | 9th working day of the following month (in practice with PAYE by the 9th) |
| NITA levy | Nil | KES 50 per employee | Per employee | Deductible expense | 9th of the following month with the PAYE return |
| PAYE (IT 2) | Graduated 10% to 35% after the deductions above and personal relief | Nil | Taxable pay | 9th of the following month | |
| HELB loan repayment (where applicable) | As notified by HELB (a minimum of KES 500 a month, or a set schedule) | Nil | Per the employee's loan | Not deductible; a private debt collected by the employer on notice | 15th of the following month |
Achieng's payslip for August 2026: gross salary KES 120,000 (basic 90,000, house allowance 25,000, commuter 5,000)
NSSF: Tier I 540; Tier II 6% × (108,000 - 9,000) = 5,940; employee 6,480 (pensionable pay is above the UEL). Employer matches 6,480.
SHIF: 2.75% × 120,000 = KES 3,300 (above the 300 minimum), deducted from the employee; no employer share.
AHL: 1.5% × 120,000 = KES 1,800 from Achieng and 1,800 from the employer.
PAYE: taxable pay 120,000 - 6,480 - 3,300 - 1,800 = 108,420. Tax: 2,400 + 2,083.25 + 30% × (108,420 - 32,333) = 22,826.10 gives 27,309.35; less personal relief 2,400 = KES 24,909.35.
Net pay: 120,000 - 6,480 - 3,300 - 1,800 - 24,909.35 = KES 83,510.65. Employer's total cost: 120,000 + 6,480 + 1,800 + 50 (NITA) = KES 128,330. Remittances by 9 September 2026: PAYE 24,909.35 and NITA 50 to the KRA; AHL 3,600 to the KRA for the Housing Fund; SHIF 3,300 to the Social Health Authority; NSSF 12,960 to the Fund.
Non-salaried contributors and special cases
- SHIF for the self-employed and informal sector: 2.75% of household income as assessed by the Authority's means-testing tool, paid annually in advance (or in instalments where allowed), minimum KES 3,600 a year; indigent households are paid for by the national and county governments; every Kenyan resident must register, and registration is a condition for accessing the benefits package at accredited facilities.
- AHL for non-employees: 1.5% of gross income (business, rental, professional) declared and paid by the person to the KRA by the 9th working day of the following month; the KRA collects it through iTax alongside the person's other obligations, and the Affordable Housing Act makes it deductible for income tax as a contribution.
- Employers with expatriate staff: AHL and SHIF apply to every employee earning a salary in Kenya, including expatriates, unless an exemption is gazetted; NSSF may be excluded under a social security agreement.
- Directors' fees and part-time earnings: AHL and SHIF apply to gross salary from employment; a non-executive director's fees are subject to AHL as income and to SHIF through the director's own household contribution rather than through the company payroll, though practice is settling.
- Second employers: each employer deducts SHIF and AHL on the salary it pays; SHIF's 2.75% is per salary source, and the Authority reconciles households.
Other levies an employer or business meets
| Levy | Rate | Base | Paid to and when |
|---|---|---|---|
| Tourism levy | 2% | Gross sales of regulated tourism activities (accommodation, food and beverage in hotels and restaurants above the threshold, tour operations) | Tourism Fund, by the 10th of the following month |
| Standards levy | 0.2% of ex-factory price, minimum KES 1,000 a month, maximum KES 400,000 a year; manufacturers with turnover of KES 5 million or less exempt | Value of manufactured goods | KEBS through the KRA, by the 20th of the following month |
| Sugar development levy | 4% | Value of domestic and imported sugar | Sugar Board, by the 10th |
| Catering training and tourism development levy (predecessor names) | Merged into the tourism levy | ||
| Agricultural and horticultural levies (tea, coffee, horticulture, dairy) | Per the Crops Act and sector regulations (percentages of value or per kilogram) | Value or quantity of produce | The relevant directorate or board, monthly |
| Betting, lottery and gaming taxes | Betting tax 15% of gross gaming revenue; lottery tax 15%; gaming tax 15%; plus excise at 5% on deposits and withholding tax on winnings at 20% | Gross gaming revenue; deposits; winnings | KRA, by the 20th (tax) and five working days (WHT) |
| Motor vehicle: advance tax on commercial vehicles | KES 2,500 per tonne of load capacity or KES 5,000 a year for goods vehicles; KES 100 per passenger seat per month or KES 5,000 a year for public service vehicles (whichever is higher) | Per vehicle at licensing | KRA, annually; a credit against income tax |
4Compliance: returns, payment and penalties
- AHL: the employer declares and pays the levy through iTax (the AHL obligation is tied to the PAYE return, and the payment is made under the AHL tax head) by the 9th working day of the following month for both the employee and employer shares; a person other than an employer declares 1.5% of gross income by the same date. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month it remains unpaid, recoverable by the KRA as tax, and failure to deduct makes the employer liable for the employee's share.
- SHIF: the employer registers on the Social Health Authority's portal (the Afya Yangu employer platform), deducts 2.75% of each employee's gross salary, files the monthly contribution schedule and pays by the 9th of the following month; late payment attracts a penalty of 2% of the unpaid contribution per month, and an employer who fails to remit is liable for the contributions and the employee's benefits denied in the meantime.
- NITA levy: declared on the unified payroll return (the PAYE return on iTax carries the NITA levy schedule) and paid with PAYE by the 9th; a penalty of 5% of the levy for each month of default applies under the Industrial Training Act, and an employer who has paid the levy claims training reimbursement from NITA.
- Tourism levy: monthly return and payment to the Tourism Fund by the 10th; a penalty of 5% of the levy and interest of 3% a month on late payment under the Tourism Act; the Fund's inspectors audit sales records.
- All the payroll deductions are shown on the employee's payslip and the annual P9 (the Employment Act requires an itemised payslip), and the employer keeps the schedules and payment receipts for five years for KRA, NSSF, SHA and NITA audits; the KRA's iTax now carries the PAYE, AHL and NITA heads in one return, while NSSF and SHIF are on their own portals.
5Examinable focus
What KASNEB tests
The payroll question now expects all four statutory deductions in the right order: NSSF (capped at KES 6,480 in 2026), SHIF at 2.75% of gross with the KES 300 minimum, AHL at 1.5% of gross, then taxable pay, the bands and the personal relief; and the employer's cost including its NSSF and AHL shares and the KES 50 NITA levy, with each remittance date (9th of the following month; 9th working day for AHL; 10th for the tourism levy). Know the legal history (the Finance Act 2023 levy struck down, the Affordable Housing Act 2024, the NHIF to SHA transition on 1 October 2024) and the tax treatment change of December 2024 (deductions, not reliefs). Theory parts ask for the purpose of each levy and the penalties for late remittance (AHL 3% a month, SHIF 2% a month, NSSF 5% a month, NITA 5%).