Quick Answer
As at October 2026, Kenya's Affordable Housing Levy is 1.5% of an employee's gross monthly salary, plus a matching 1.5% from the employer (3% in total). Employers declare it on sheet M of the iTax PAYE return and pay it under Agency Revenue > Housing Levy by the 9th working day after the end of the month. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month it is outstanding.
Key Takeaways
  • As at October 2026, the Affordable Housing Levy is 1.5% of the employee's gross monthly salary plus a matching 1.5% employer contribution, 3% in total, under the Affordable Housing Act, 2024. The levy has applied since 19 March 2024.
  • The Act does not define gross salary. KRA guidance treats it as basic salary plus regular cash allowances such as housing, commuter and car allowances. Non-cash benefits and irregular payments such as bonuses, leave allowance and gratuity are excluded.
  • Employers with a PAYE obligation declare the levy on sheet M of the iTax PAYE return, then generate a payment slip under Payments > Payment Registration, Tax Head 'Agency Revenue', Tax Sub Head 'Housing Levy'.
  • The levy is due by the 9th working day after the end of the month in which the salary was due. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month.
  • Since 27 December 2024 the employee's levy is deducted from employment income before PAYE is calculated, and the former affordable housing relief no longer applies.

The Affordable Housing Levy in Kenya has become an essential part of payroll compliance for employers. Understanding how to calculate, deduct, and remit the levy is crucial for avoiding penalties and ensuring compliance with the Kenya Revenue Authority (KRA). This guide explains exactly how to compute the levy, defines gross salary, clarifies common confusion points, and provides step-by-step instructions for remittance. For businesses managing multiple compliance requirements, integrating payroll with professional Tax Compliance Services in Kenya ensures accuracy and efficiency.

What is the Affordable Housing Levy?

The Affordable Housing Levy is a statutory levy imposed by the Affordable Housing Act, 2024 with effect from 19 March 2024 and collected by the Kenya Revenue Authority. It funds the government’s affordable housing programmes and applies to both employers and employees. People who receive income that is not a salary pay 1.5% of that gross income. Contributions are calculated as a percentage of gross monthly salary, and remittance is done via the KRA portal.

Employers deduct the employee’s share from salary, add the matching employer share and remit both to KRA. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month that it remains unpaid. Under section 39B of the Tax Procedures Act, inserted by the Finance Act, 2026, KRA can also recover an unpaid levy as if it were unpaid tax.

Understanding Gross Salary

A major point of confusion is the definition of gross salary. The Affordable Housing Act does not define gross salary. KRA guidance treats gross monthly salary as basic salary plus regular cash allowances, so it includes:

  • Basic salary

  • Housing allowance and travel or commuter allowance

  • Car allowance

  • Other cash allowances paid regularly with monthly pay

It excludes non-cash benefits and payments that are not made regularly, such as leave allowance, bonuses, gratuity, pension and severance pay. Correctly calculating gross salary ensures accurate levy deductions and avoids penalties.

Levy Rates for Employers and Employees

As at October 2026, the Affordable Housing Levy is calculated at a 1.5% rate on gross salary for both employers and employees, effectively totalling 3% per employee. Since 27 December 2024, the employee’s levy is deducted from employment income before PAYE is calculated (the former affordable housing relief no longer applies), and the employer’s share is an allowable deduction for income tax.

Example Calculation:

Gross Salary (KES) Employee Contribution (1.5%) Employer Contribution (1.5%) Total Levy (KES)
30,000 450 450 900
50,000 750 750 1,500
80,000 1,200 1,200 2,400
120,000 1,800 1,800 3,600

This method ensures proportional contributions and simplifies reporting for payroll departments.

How to Remit the Housing Levy on KRA Portal

Employers with a PAYE obligation declare and pay the levy on iTax, Kenya Revenue Authority’s online portal. KRA’s step-by-step guide sets out the process:

  1. Log in to your iTax account using your PIN and password.

  2. Go to Returns > File Return, choose Income Tax – PAYE and complete sheet M (Affordable Housing Levy details) with each employee’s gross salary. The levy totals carry through to the tax due sheet.

  3. Validate, upload and submit the return, then go to Payments > Payment Registration and select Tax Head “Agency Revenue”, Tax Sub Head “Housing Levy” and the tax period.

  4. Check the pre-filled amount, which is the total deducted from employees plus your matching employer contribution, and generate the payment slip.

  5. Pay at a KRA agent bank or by mobile money (eCitizen Paybill 222222) and keep the return receipt and payment slip for your records.

The levy is due monthly, by the 9th working day after the end of the month in which the salary was due. It is paid on its own payment slip, separate from PAYE. Employers with no PAYE obligation, and people paying on their own gross income, go straight to Payment Registration.

Common Confusion Points

  1. Gross vs. Net Salary: Always calculate the levy based on gross salary, not take-home pay.

  2. Allowances: Regular cash allowances such as housing, commuter and car allowances are included; non-cash benefits and irregular payments such as bonuses and leave allowance are not.

  3. Remittance Timing: Pay by the 9th working day after month end. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month it is outstanding.

  4. Multiple Employees: Ensure each employee’s gross salary is correctly captured to avoid errors in total contribution.

For organisations handling large payrolls, professional services like Tax Compliance Services in Kenya help automate calculation, remittance, and reconciliation processes.

Tips for Smooth Levy Compliance

  • Automate Payroll: Use ERP systems that calculate housing levy automatically.

  • Maintain Records: Keep digital logs of all deductions and receipts.

  • Educate Employees: Ensure employees understand the deduction to avoid queries.

  • Reconcile Monthly: Compare payroll deductions with KRA submissions to prevent errors.

Benefits of Accurate Housing Levy Compliance

By combining payroll, levy calculation, and remittance, companies can streamline compliance and focus on core business operations.

Conclusion

The Housing Levy in Kenya is a mandatory contribution for both employers and employees, calculated at 1.5% of gross salary each. Accurate calculation, timely deduction, and proper remittance via the KRA portal are essential to remain compliant and avoid penalties. Understanding gross salary definitions and common confusion points ensures smooth payroll management. Businesses can leverage Tax Compliance Services in Kenya to automate housing levy calculations, maintain records, and reconcile payments efficiently.

Frequently Asked Questions

How much is the Housing Levy in Kenya?
As at October 2026, the levy is 1.5% of gross monthly salary from the employee and a matching 1.5% from the employer, 3% in total. For a KES 50,000 gross salary that is KES 750 from each side, KES 1,500 in total. People who earn income other than a salary pay 1.5% of that gross income.
What counts as gross salary for the Housing Levy?
The Affordable Housing Act does not define gross salary. KRA guidance treats it as basic salary plus regular cash allowances, such as housing, travel or commuter and car allowances. Non-cash benefits and payments not made regularly, such as leave allowance, bonuses, gratuity, pension and severance pay, are excluded.
How do employers file and pay the Housing Levy on iTax?
Employers with a PAYE obligation file the PAYE return on iTax and complete sheet M (Affordable Housing Levy details) for each employee. After submitting the return, go to Payments > Payment Registration, select Tax Head 'Agency Revenue', Tax Sub Head 'Housing Levy' and the tax period, generate the payment slip and pay at a KRA agent bank or by mobile money. Employers with no PAYE obligation go straight to Payment Registration.
When is the Housing Levy due?
The levy is due by the 9th working day after the end of the month in which the salary was due or the income was received. It is paid on its own payment slip, separate from PAYE. Late payment attracts a penalty of 3% of the unpaid amount for each month or part of a month it remains unpaid. Under section 39B of the Tax Procedures Act, inserted by the Finance Act, 2026, KRA can also recover an unpaid levy as if it were unpaid tax.
Is the Housing Levy deductible for PAYE?
Yes. Since 27 December 2024, the employee's Affordable Housing Levy is deducted from employment income before PAYE is calculated, and the former affordable housing relief no longer applies. The employer's contribution is an allowable deduction for income tax.