Instalment Tax in Kenya: Who Pays, How Much and When

Instalment tax is income tax paid in four parts during the year, instead of one sum after the year ends. Companies pay it, and so do individuals with income other than a salary, unless their total tax for the year is KES 40,000 or less. Each part is due on the 20th of the 4th, 6th, 9th and 12th months of your accounting year.

The problem for many owners is timing. They expect to pay tax after the accounts are done, then find that interest and penalties have already been running for months.

Who pays

The rule is in section 12 of the Income Tax Act. It starts with every person chargeable to tax, then leaves some people out:

• People with only a salary. Since 1 July 2026, the test is whether you expect to have no chargeable income other than employment income, as reworded by the Finance Act 2026.
• Individuals with small tax bills. No instalment tax is payable where the individual’s total tax for the year is KES 40,000 or less.
• Turnover tax payers. KRA says: “Installment taxes are not payable by persons who are subject to Turnover Tax (TOT).” You pay that tax monthly instead. See turnover tax or income tax.

Two points are less clear:

• Companies and the KES 40,000 limit. The Act applies this limit to individuals, while one KRA page describes it for companies. A company should plan to pay, and should confirm with KRA before relying on that page.
• Salary plus a side business. You have income other than a salary, so the first exception does not help you. The Act does not spell out whether PAYE counts when testing the KES 40,000 limit. Confirm this point with KRA.

When to pay

The Twelfth Schedule sets equal parts of 25 percent, due on or before the 20th day of these months in your accounting year.

Instalment	Share	December year end	June year end
4th month	25%	20 April	20 October
6th month	25%	20 June	20 December
9th month	25%	20 September	20 March
12th month	25%	20 December	20 June

Farmers have a different pattern. If you can satisfy KRA that more than two thirds of your income comes from agricultural, pastoral, horticultural or similar activities, you pay 75 percent by the 20th of the 9th month and 25 percent by the 20th of the 12th month.

How much to pay

Section 12(2) gives two ways to work out the yearly amount, and you pay the lower one:

• Current year. The tax on your estimated income for this year.
• Prior year. The tax in last year’s assessment, plus 10 percent.

Next, take off tax already paid or due to be paid during the year through withholding tax, PAYE and advance tax (section 12(3)). Divide what is left across the instalments.

The current year method suits a new business, or one whose profit has dropped. It depends on a real estimate, so update it as the year goes on, using up-to-date books.

Example. A company with a December year end was assessed at KES 800,000 last year.

Step	KES
Prior year tax plus 10%	880,000
Estimated tax on this year’s income	1,000,000
The lower of the two	880,000
Less withholding tax expected in the year	(80,000)
Yearly instalment tax	800,000
Each of the four payments	200,000

The figures are for illustration only.

After the year ends

Instalments are a credit against your final tax, not an extra tax. When your accounts are ready, you compare the tax due with what you have paid.

Any balance is due by the last day of the 4th month after your year end (section 92A). For a December year end, that is 30 April.

That date falls before the return is due for companies, which have until the end of the 6th month. So a company needs its figures ready two months before its return deadline. From 1 January 2027, individuals must file by the end of the 4th month, so the return and the balance fall on the same day.

If you pay late

The general rules in the Tax Procedures Act apply to tax not paid on its due date:

• A 5 percent penalty on the tax due (section 83A).
• Interest of 1 percent a month or part of a month, as simple interest, up to the amount of the tax (section 38).

Interest cannot be recovered once paid unless the tax is later found not to have been due, so set the four dates in your calendar at the start of each year. If cash is tight, use the ideas in profitable but broke to set money aside as you earn it, and speak to a professional before a date passes rather than after.