Minister of State for Finance, Henry Musasizi, has dismissed media reports claiming that the Pay As You Earn (PAYE) tax rate was set to increase from 15% to 40%, describing such claims as false. Instead, he confirmed that the government is proposing an adjustment to the PAYE threshold, which will benefit low-income earners.
Musasizi explained that the current PAYE threshold of UGX235,000 will be raised to UGX335,000, meaning individuals earning below UGX335,000 will no longer pay PAYE.
“The thresholds have been, the lowest category has been UGX235,000. Now we are proposing to start from UGX335,000. In other words, we have exempted all those people who earn below UGX335,000. They will now be exempted. The lowest individual category paying tax will begin from UGX335,000 and above,” Musasizi said during a briefing at Parliament.
He further clarified that individuals earning more than UGX120 million per year (or UGX10 million per month) will continue to be taxed at the top rate of 40%, while those earning below UGX10 million per month will continue to pay normal rates.
“Instead of increasing tax, we are favoring those who earn little. For instance, someone earning UGX300,000 who was previously paying PAYE will now be exempt,” he said.
The Minister noted that this proposal will cost the government UGX96 billion, emphasizing that the move is designed to support low-income earners.
“This is mainly to favor those earning little. Those above UGX10 million will continue paying 40%—which is what I pay as a member of Parliament because my salary is above UGX10 million,” Musasizi added.
The adjustment is part of the government’s broader fiscal measures for the 2026/27 financial year, aiming to ease the tax burden on lower-income earners while maintaining revenue from higher earners.
