Income tax for an unincorporated business on the individual bands.
Income tax (annual)
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Allowable pension
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Taxable income
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Effective rate
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Why the individual bands apply, not a flat company rate
If you trade as a sole proprietor in Kenya, your business is not a separate taxpayer. There is no company sitting between you and the Kenya Revenue Authority, so the profit your business makes is treated as your personal income. That is the single fact that shapes everything this calculator does. You are taxed on the same progressive scale that an employed person faces under PAYE, applied once a year to your net business profit rather than month by month to a salary.
The scale rises in steps. On the figures this calculator applies, the first KES 288,000 of taxable income is charged at 10 percent, the slice up to KES 387,996 at 25 percent, the long middle band up to KES 6 million at 30 percent, then 32.5 percent up to KES 9.6 million, and 35 percent above that. Every resident also gets the personal relief, a flat KES 28,800 a year, knocked off the tax itself rather than off the income. These are the bands and the relief the tool uses today, and because Kenya rewrites them in most Finance Acts, you should treat them as a working model and confirm the current position with the KRA before you file.
The pension deduction that quietly lowers your bill
Contributing to a registered retirement scheme is one of the few levers a sole proprietor can pull to cut taxable profit legitimately. The allowance is not unlimited. It is the lowest of three numbers: what you actually paid in, 30 percent of your pensionable income, and a cap that this calculator sets at KES 30,000 a month, which works out to KES 360,000 a year. So a large contribution made in a thin year can be partly wasted, because the 30 percent test bites before the cash cap does. The tool runs that test on a monthly basis and then annualises the result, which is why the allowable figure it shows can be smaller than the amount you typed.
A profit of KES 1.5 million, worked through
Take a consultant with KES 1.5 million in net profit who paid KES 120,000 into a pension over the year. Monthly, that is KES 10,000 against pensionable pay of KES 125,000. The 30 percent test allows up to KES 37,500 and the cap allows KES 30,000, so the full KES 10,000 sails through and the whole KES 120,000 is deductible. Taxable income falls to KES 1,380,000, and the bands are then applied using the rates this calculator applies.
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That leaves an annual income tax bill of about KES 322,600, an effective rate of 21.51 percent on the full profit even though the top slice was taxed at 30 percent. The chart above shows how the profit splits between tax and what you keep.
Turnover tax: the alternative worth checking
The bands are not always the cheapest route. If your annual turnover, not profit, falls between KES 1 million and KES 25 million, you may instead pay turnover tax at 3 percent of gross sales, with no deductions allowed. That is attractive when margins are fat, because a high-margin business pays tax on a small slice of revenue under the bands but on all of it under turnover tax. It is punishing when margins are thin: a trader turning over KES 10 million on a 5 percent margin makes KES 500,000 profit, yet turnover tax would charge KES 300,000, far more than the bands would. Run both before you elect. The rate and the band limits here are the ones the calculator applies, and the KRA can revise them, so verify before committing.
Common questions
Can I deduct my SHIF and housing levy contributions as a sole proprietor?
This particular tool models only the pension deduction against profit, so it does not subtract them. In practice the treatment of health and housing contributions for self-employed people has shifted with recent reforms, and it differs from the payroll deductions an employer makes. Because that area has been changing, check the current rules with the KRA rather than assuming the employee position carries over.
Do I still pay instalment tax during the year?
Yes. Income tax on business profit is not a single year-end payment for most traders. The KRA expects instalment tax in quarterly slices based on your estimated or prior-year liability, with the balance settled when you file. This calculator shows the annual figure; the instalments are simply that figure paid earlier in the year.
Who is this calculator really for?
Freelancers, consultants, small shop owners, and anyone trading under their own name without registering a limited company. If you have incorporated, your profit is taxed at the corporate rate instead, and a different tool applies.