Declaring and paying the Housing Levy as an employer
How a Kenyan employer works out, declares and pays the Affordable Housing Levy each month, from sheet M of the PAYE return to the payment slip.
By Achekam · · 4 min read · For Running a business businesses in Kenya
The Affordable Housing Levy is now a fixed line on every Kenyan payslip, but for the person running payroll it is more than a deduction. There is an employer's share to add, a particular sheet of the PAYE return to complete, a payment slip with its own tax head, and a deadline counted in working days rather than calendar days.
None of it is complicated once it is set up. The trouble comes in the first months, or when a new payroll officer takes over and handles the levy like PAYE. This article walks through each step as KRA describes it, at the time of writing.
The two shares
KRA's public notice of 21 March 2024 sets out the basic arithmetic. Since 19 March 2024, every employer has had to deduct the levy at 1.5% of each employee's gross monthly salary, and to pay it over together with a contribution of its own, also 1.5%.
The Affordable Housing Act, 2024 frames it the same way. Section 5(1) requires the employer to deduct the levy from gross salary and remit it with an equal amount from the employer to the collector. KRA's notice explains that the Act makes KRA that collector.
So for each employee, the amount paid to KRA each month is twice the employee's deduction: half from the employee, half from the business. Budget for the employer's half as a cost of employment, not as something recovered from staff.
KRA's public notice on collecting the Affordable Housing Levy sets out the rate, where the levy is declared, how to pay and the due date.
Sheet M of the PAYE return
The levy does not have its own separate return. KRA says employers declare it on sheet M of the PAYE return on iTax. That means the levy is prepared with the monthly PAYE return, and a mistake on the PAYE side often shows up in the levy as well.
Practical points when completing sheet M:
- use gross salary, as the notice says, not taxable pay after deductions;
- include every employee on the payroll for the month, including new starters and leavers;
- check the employee and employer amounts agree with your payroll records before you submit.
How the P10 return fits together is explained in the monthly P10 PAYE return.
The payment slip and how to pay
Once declared, the levy is paid through its own payment slip. KRA says employers generate it on iTax under the tax head "agency revenue" and the sub-head "Housing Levy". The slip carries a payment reference number (PRN).
KRA says payment can be made at KRA agent banks, or through eCitizen on paybill 222 222 or by dialling *222#. Use the PRN from the slip as the reference so the payment is matched to the right liability.
The ninth working day
KRA says the levy is due by the 9th working day after the end of the month in which the gross salary was due. Working days, not calendar days: weekends and public holidays push the date later in the month, and the exact day changes from month to month.
Missing it is costly. KRA says a person who fails to comply is liable to a penalty of 3% of the unpaid levy for every month it remains unpaid. Work out the due date for each month at the start of the year and put it in the payroll calendar.
The employer's share as a deductible expense
There is one piece of good news. KRA says the employer's contribution to the levy is an allowable deduction under section 15 of the Income Tax Act. Post the employer's share to its own expense account so it is easy to find when the annual return is prepared.
Achekam's levy liability account and recording the payment
Achekam runs Kenyan payroll with PAYE, the Affordable Housing Levy, SHIF, NSSF Tier I and II and the NITA levy. When a run is approved, each contribution posts to its own liability account; the levy goes to Housing Levy Payable (KRA). The amount owed stays visible on the balance sheet until it is paid.
The monthly P10, SHIF, NSSF and NITA schedules are prepared from approved runs, which gives you the figures for sheet M without re-adding the payroll.
When the payment is made, Achekam records it with KRA's own reference, the PRN, and receipt. It never generates a payment reference itself, it refuses the discontinued paybill 572572, and a second person must confirm the payment before it counts. Once confirmed, the Housing Levy Payable account should return to nil for that month.
Who collects which deduction, and where each one is paid, is summarised in Kenyan payroll deductions and who collects them.
A monthly levy routine
- Approve the pay run and check the levy lines for each employee.
- Confirm the employer's matching share is included.
- Complete sheet M of the PAYE return on iTax.
- Generate the payment slip under "agency revenue", sub-head "Housing Levy".
- Pay by the 9th working day using the PRN.
- Record the payment, have a second person confirm it, and check the liability account is clear.
If you employ people and also have income outside payroll, the levy may apply there too; see Housing Levy on non-salary income.
Work out this year's due dates for every month now. With a working-day deadline, that list is the single most useful thing on the payroll officer's desk.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
