For many salaried individuals the pay slip is usually just glanced at briefly, if at all. The focus is mostly on the net pay to determine whether rent, fuel, school fees or food shopping will be comfortably covered that month.
You would ignore what sits above that number considering the maze of deductions, reliefs and statutory entries. Within those overlooked lines there are tax reliefs that, if properly understood and claimed, can reduce the amount of pay as you earn (PAYE) deducted every month.
John Swaga, a payslip specialist agrees that this lack of attention is very common. “Very few employees understand the tax reliefs on their payslips or even their existence and how to utilise them. Majority only check on their net pay, ignoring the detailed tax and statutory breakdowns summarised in the payslips,” he says.
The result is that the reliefs designed to cushion workers against the heavy tax burdens in most cases usually go unused, misunderstood or even underclaimed.
Common reliefs
Mortgage interest relief and life insurance relief are among the top of these provisions. They are meant to reward long-term financial commitments such as home ownership and insurance protection, yet they are still the most poorly understood items in payroll processing.
Mr Swaga explains that a major part of the confusion comes from the assumption that once a deduction appears on the pay slip, everything else must be automatic. In practice, that is rarely the case.
For example, for a mortgage interest to qualify as an allowable deduction for PAYE purposes, employees are required to actively submit their documentation.
“For Mortgage Interest to be an allowable deduction for PAYE purposes, the employee must provide Mortgage Interest Certificate issued by the Lender (one of the first six financial institutions specified in the Fourth Schedule of the Income Tax Act),” he says.
Mr Swaga adds that the property must also be owner-occupied and strictly for residential purposes. Even so, the relief has limits too. “The Mortgage Interest allowability is capped at Sh30,000 per month and Sh360,000 per year. So, if you have a mortgage whose interest is Sh10,000 and your salary is Sh50,000, you will be taxed on Sh40,000 as the interest will be exempted from tax.”
Common misconceptions
Insurance relief also follows a similar structure but just like others its usually a misunderstood process. “For insurance reliefs, the employee must provide Life Assurance Plan Eligibility Certificate issued by the insurance company,” Mr Swaga says.
That certificate must clearly spell out the policy number, policyholder details, sum assured, commencement and maturity dates, payment frequency and the premium paid or payable. Without this, payroll departments cannot apply the relief. The benefit is defined in law. “The relief is the 15 percent of the premium paid that is capped at Sh5,000 per month, which translates to Sh60,000 per year.”
However despite these rules, many employees miss out through some simple errors. Mr Swaga says late submissions are common.
“Submitting documents late after payroll has run or later in the year when PAYE has already been deducted in full, is one frequent mistake.”
Others mistake Mr Swaga says includes submitting the same documents already submitted elsewhere for employees with two different employers under the same period and submitting non-qualifying policy documents for relief consideration. These errors are often noticed too late when correcting the payroll becomes complex or when annual tax returns are already due.
Another common misconception is that reliefs apply automatically once an employee’s deductions begin.
“Most employees assume that once they have an insurance check-off deduction in their payslip (i.e in cases where employers have check-off arrangements with employers), that the relief becomes automatic. This is not the case. Legibility certificates must be submitted to the Payroll Department,” Mr Swaga explains.
The assumption that employers or insurers will coordinate everything usually leaves many employees unknowingly overpaying tax.
Tax relief purposes
At the policy level, the reliefs serve a broader economic goals. George Obell, Commissioner for the Micro and Small Taxpayer at the Kenya Revenue Authority (KRA), says that tax reliefs are not arbitrary giveaways, they are targeted incentives written into law.
“The policy objectives are always specific to the relief that is provided in the legislation. For mortgage relief, those objectives include stimulating growth of the real estate sector, promoting home ownership, and increasing disposable income,” Mr Obell says.
Further, Mr Obell explains that insurance relief is anchored in long-term financial resilience.
“Its objectives will include advantages like incentivising long-term savings. Life insurance acts as a mobiliser of domestic savings and enhances the social security,” he says.
He also highlights its macroeconomic impact, noting that capital market development, the large-scale accumulation of premiums allows insurance companies to invest in wider economic projects, which deepens the local capital market. This, he says, is as well as the educational support where the relief on education policies specifically aims to ensure families can fund future human capital development.
Eligibility criteria
The eligibility for these reliefs Mr Obell states that they are available to resident individuals who meet statutory criteria. Unlike mortgage, insurance relief, by contrast, is a tax credit that directly reduces tax payable. It applies to resident individuals who pay premiums for life, education or health insurance for themselves, their spouse or their children.
“For education policies, the plan must have a maturity period of at least 10 years to qualify and the policy must be denominated in Kenyan currency.”
Even as new deductions such as the affordable housing levy and the social health insurance fund take effect, Mr Obell insists that reliefs still matter. “These tax reliefs remain significant financial cushions, although their impact is increasingly being measured against new mandatory deductions,” he says.
Biggest relief beneficiaries
He also says that the actual benefit depends on an individual’s tax bracket. For middle- to high-income earners, the reliefs can still substantially reduce PAYE.
For those planning long-term financial commitments, he advises, “Employees should ensure long-term financial commitments are both tax-compliant and optimised for maximum savings. Confirm that providers are recognised, and prioritise proper documentation and timely declaration.”
Need for payroll education
Mr Swaga also argues that employees have a crucial role to play in closing this knowledge gap, particularly as statutory deductions continue to rise. He believes payroll education should not be reactive but embedded into workplace culture.
“Employers should conduct sensitisation sessions to create awareness on the available reliefs and allowable deductions the employees can utilise to reduce their tax burden.”
He adds that employers should also explain the tax reliefs and mortgages interest deductibility during onboarding and issue annual reminders at the beginning of the year for staff to update or submit eligibility certificates.”
Beyond the internal training, Mr Swaga points to the value of partnerships. He says employers can partner with financial institutions for cash-backed mortgage scheme to enable employees to access mortgages at lower interest rates while utilising the mortgage interest tax allowability.
“Employees should also use valid eligibility certificates when claiming reliefs and submit their eligibility certificates to employers at the beginning of the year to enjoy the full year’s relief or mortgage interest allowability,” he says.
