Insurance relief on Kenyan payslips
How insurance relief reduces a Kenyan employee's PAYE, which policies qualify, the annual cap, the education policy rule and the evidence to keep.
By Achekam · · 4 min read · For Running a business businesses in Kenya
An employee walks into the payroll office with a life policy schedule and asks why her payslip shows no insurance relief. Another has been receiving relief for years on a policy he cashed in last March. Both conversations are common in Kenyan workplaces, and both are the employer's problem, because the employer is the one applying the relief when it calculates PAYE.
Insurance relief is a reduction in the tax itself, not in taxable pay. Getting it right means knowing which policies qualify, how much relief they produce, and what proof to hold before the relief goes onto a payslip.
Which policies qualify
KRA says insurance relief is given on premiums paid on life, health or education policies for the employee, the employee's spouse or the employee's child.
That gives two tests to apply to every claim:
- The type of policy. Life, health or education cover qualifies. Other insurance, such as cover on a car or a house, is not in KRA's list.
- The person insured. The policy must be for the employee, a spouse or a child. A policy an employee pays for a parent or a sibling falls outside the wording.
Some products blur the lines, such as a savings plan with a small life cover attached. When a policy is hard to classify, ask the employee to get the insurer's written confirmation of what kind of cover it is before payroll gives any relief on it.
The rate and the annual cap
KRA puts the relief at 15% of the premiums paid, up to a maximum of KShs 60,000 per year. The Income Tax Act, in its consolidated version on Kenya Law dated 1 July 2026, sets the same figures in its Third Schedule: insurance relief at fifteen per cent of premiums paid, up to sixty thousand shillings a year.
Two points follow for payroll. The relief is a percentage of premiums actually paid, so a policy that has lapsed or been suspended stops producing relief. And the cap is annual, so an employee with large premiums reaches the ceiling and goes no further, however many qualifying policies they hold. Check the figures on KRA's page at the start of each year, because rates and caps can change.
Insurance relief sits beside personal relief, which KRA sets at KShs 2,400 a month for resident individuals. Both reduce the tax worked out from the bands; how the bands themselves work is explained in working out PAYE with the Kenyan tax bands.
Education policies and the maturity rule
Education policies carry an extra condition. KRA says the policy must have a maturity period of at least 10 years. A short-term savings plan sold as an education policy, maturing in five years, does not qualify, however clearly it is labelled for school fees.
Ask for the policy schedule rather than a marketing brochure, and look for the start date and the maturity date. Note both in the employee's file so the check does not have to be repeated each year.
Evidence to collect from employees
KRA's page describes the relief but does not set out an employer's evidence pack. A sensible file for each claim holds:
- The policy schedule, showing the insurer, the type of cover, the person insured and, for education policies, the maturity date.
- Proof of the relationship where the insured person is a spouse or child.
- Proof of the premium amount and how often it is paid, such as the insurer's premium notice or a deduction instruction.
- A short signed note from the employee confirming the policy is in force and promising to tell payroll if it lapses, is surrendered or changes.
The last item does the most work. The employer cannot see an employee's dealings with an insurer, so the duty to report changes has to sit with the employee, in writing.
Where Achekam applies the relief
Achekam's Kenyan payroll calculates PAYE with personal relief and insurance relief, together with NSSF Tier I and II, SHIF, the Affordable Housing Levy and the NITA levy. Each contribution posts to its own liability account when the run is posted, and the P10 schedule and each employee's P9A are prepared from approved runs.
Before any run uses the Kenyan tax table, a named person at the business must confirm its own copy: Achekam ships its payroll tax tables pre-loaded but unconfirmed, and no run uses a table until that confirmation is made. That is the moment to check the relief rate and cap against KRA's current figures.
The policy schedules and signed notes belong in Document Centre, Achekam's folder-based store, where a business can upload files, tag them by employee and year, and keep earlier versions when a new schedule replaces an old one.
An annual review of claims
Once a year, ideally before the P9A cards go out, review every employee receiving insurance relief:
- Is the policy still in force? Ask for the latest premium notice.
- Has the premium changed since the relief was set up?
- Is the insured person still a spouse or child of the employee?
- For education policies, does the maturity period still meet the rule after any restructuring?
- Has anyone joined the business with a policy they have not told payroll about?
Relief given on a policy that has lapsed means too little tax was deducted, and putting that right months later is awkward for the employee and the employer alike. A short review avoids the conversation. For the year-end side, see P9A forms at year end.
KRA's PAYE page explains how employers deduct and remit PAYE, and lists the reliefs, including insurance relief, at the rates current at the time of writing.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
