The Affordable Housing Levy was introduced under the Finance Act 2023 and has been applied to Kenyan payrolls since July 2023. Despite being over a year old, its calculation and remittance still generate questions from HR teams — particularly around which earnings are included in the base and how the employer contribution is reported.
The basic rule
- Employee deduction: 1.5% of gross salary
- Employer contribution: 1.5% of gross salary
Both sides are mandatory. The levy applies to all employees in formal employment, regardless of salary level. There is no lower threshold and no upper cap.
What counts as gross salary
The levy applies to all cash emoluments paid by the employer. This includes:
- Basic salary
- House allowance
- Transport allowance
- Responsibility allowance
- Any other regular cash payment
It does not include:
- Reimbursements (expense claims against receipts)
- One-time payments that are not part of regular remuneration (subject to interpretation)
- Benefits in kind (company car, medical insurance) — these are not cash emoluments
The practical implication: if an employee's payslip shows gross pay of KES 70,000 (basic KES 50,000 + house allowance KES 15,000 + transport KES 5,000), the housing levy base is KES 70,000.
The calculation
For the same employee earning KES 70,000 gross:
- Employee housing levy: 1.5% × KES 70,000 = KES 1,050
- Employer housing levy: 1.5% × KES 70,000 = KES 1,050
- Total levy remitted: KES 2,100
Remittance
Housing Levy is remitted to KRA via the iTax portal. It is filed together with PAYE under a separate payment code. The deadline is the 9th of the following month.
One common mistake: including the housing levy with PAYE remittance without the correct allocation. KRA's system distinguishes between PAYE and Housing Levy — they need to be filed as separate line items even if the payment is made in a single transaction.
Tax deductibility
The employer's 1.5% contribution is deductible as a business expense. The employee's 1.5% deduction qualifies for a personal tax relief of 15% of the contribution, up to a maximum relief of KES 9,000 per annum.
This relief is applied automatically when calculating PAYE for the employee. If your payroll system is computing PAYE without applying the housing levy relief, it is over-deducting tax.
Who is excluded
Casual employees working less than one month continuously are not subject to the housing levy. The rules around continuous versus intermittent casual employment are worth reviewing if you have a significant casual workforce, as misclassification in either direction creates compliance exposure.
A note on enforcement
KRA has been active in enforcing housing levy compliance as part of broader payroll audits. During an iTax audit, the examiner will check housing levy filings against payroll records. Employers who omitted the levy or remitted only the employee portion without the matching employer contribution have received assessments with penalties.
The levy is modest — 1.5% each way is not a large payroll cost. The compliance risk of missing it, however, is disproportionate to the levy amount. Set it up correctly from the start and the ongoing burden is zero.
AndikishaHR computes both the employee and employer housing levy automatically on every payroll run and includes both in the KRA filing report, correctly split from the PAYE line item.
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AndikishaHR handles all Kenya statutory compliance automatically. When KRA updates the brackets, the platform updates. Your next payroll just runs correctly.