Gratuity Calculator Kenya 2026
How much gratuity is due, and is it tax-free?
The end date in the contract.
House, transport and other cash emoluments.
Decides which tax rules apply.
0 if the gratuity is paid after the last salary.
Early exit, renewals and emoluments
Only if the contract ended early. Leave blank if it ran to the end date.
s.5(4)(ga) also covers a renewal or extension of a 3-year contract. Rolling 1 or 2-year contracts don't qualify.
Optional. Leave at 0 to use (basic + allowances) × months. Enter a figure to include bonuses or benefits.
Interpretation and tax method
Untick to tax only the part above 31%. KRA hasn't said which is right.
For payments from July 2026. Some read the Finance Act 2025 exemption as protecting this accrual even if the new test fails.
Exempt up to KES 360,000 per year of service (s.5(4)(g)).
Gratuity
paid 28 Oct 202631% × KES 100,000 basic × 36 months
Finance Act 2026 exemption test
PassesPaid from 1 July 2026: Finance Act 2026 s.5(4)(ga) applies. Gratuity is exempt only if the contract is at least 3 continuous years and the gratuity is no more than 31% of emoluments earned over the contract. Gratuity earned before 1 July 2025 stays taxable.
- Months counted
- 36
- Emoluments
- 3,600,000
- Effective tax
- 19.9%
- Over 31%, the whole gratuity loses the exemption. The Act states conditions, not a cap.
- Gratuity earned July 2025 to June 2026 is subject to the new test when paid from July 2026.
- Emoluments mean total pay over the contract, excluding the gratuity. The Act says emoluments, not basic salary, and doesn't define the word.
- The 3 years are the contract term, not actual service.
Taxable gratuity is PAYE-only: NSSF, SHIF and housing levy don't apply to it. Gratuity paid to a deceased employee's estate is still taxable; the death-benefit exemption covers pension, provident fund and NSSF benefits only.
How it's worked out
- Work out the gratuity: rate × monthly basic × months served (part months counted as a fraction), or days' pay × basic ÷ 30 × completed years, or the fixed amount.
- Work out emoluments over the contract: (basic + cash allowances) × months, unless you enter a total.
- Run the Finance Act 2026 test: contract term of at least 3 completed years (or a renewal of one), and gratuity no more than 31% of emoluments.
- Split the gratuity by when it was earned, in proportion to days of service before July 2025, July 2025 to June 2026, and from July 2026.
- Apply the rules in force on the payment date (table below) to find the taxable part. Gratuity paid into a registered pension scheme gets up to KES 360,000 per year of service off.
- Work out PAYE on the taxable part, either in the payment month on top of that month's salary, or spread back to the 2024 and 2025 tax years using annual bands.
Which rules apply
| Paid | Taxable |
|---|---|
| Before 1 Jul 2025 | All of it |
| 1 Jul 2025 to 30 Jun 2026 | Only the part earned before 1 Jul 2025 |
| From 1 Jul 2026, test passed | Only the part earned before 1 Jul 2025 |
| From 1 Jul 2026, test failed | All of it (or only the excess over 31%, if that reading is right) |
Questions people ask
Is gratuity tax-free in Kenya in 2026?
From 1 July 2026, gratuity is exempt only if it relates to a contract of at least three continuous years (or a renewal or extension of one) and doesn't exceed 31% of the emoluments you earned over the contract (Income Tax Act s.5(4)(ga), Finance Act 2026). Gratuity earned before 1 July 2025 remains taxable.
Is the 31% measured against basic salary or total pay?
The enacted Finance Act 2026 says "emoluments earned by the employee for the period of the contract", meaning your total pay over the contract, not just basic salary. The earlier Finance Bill said "basic salary", and some summaries still repeat that.
How is gratuity different from service pay?
Gratuity comes from your contract or a CBA. Statutory service pay (Employment Act s.35(5)) is only for monthly-paid staff on open-ended contracts who aren't in NSSF or a pension scheme. Courts usually award it at 15 days' pay per completed year.
How is taxable gratuity for earlier years taxed?
KRA requires gratuity earned in past years to be added to your income for those years (up to four years back; older amounts go to the fifth year). The extra tax is the difference, less tax already paid.
What happens if gratuity is more than 31%?
The Act makes 31% a condition of the exemption. KRA hasn't said whether the whole gratuity or only the part above 31% then becomes taxable. This calculator taxes the whole amount by default and shows the other reading alongside.
Sources
Rates last checked 13 Sep 2026. Estimates only, not tax or legal advice.