Who This Actually Applies To
A lot of Kenyans carry a mental model that tax is something that happens to you automatically when you're employed — HR handles it, and everyone else is somehow exempt. That's not how KRA sees it.
If you earn income from any of the following, you have a tax obligation:
- Freelancing — graphic design, web development, copywriting, consulting, social media management
- Side hustles — baking and food delivery, tutoring, photography, clothing resale, event decor
- Gig platforms — Uber, Bolt, Glovo, Mr. Green, Fiverr, Upwork, YouTube monetisation
- Any informal income — anyone earning outside of a formal payroll where PAYE is deducted at source
The threshold for caring is not "am I making millions?" It's "am I earning?" If yes, KRA expects you to be filing.
The Two Paths: Turnover Tax vs Normal Business Income
This is the most important decision you'll make as a freelancer, and it's one most people stumble into without realising there's a choice. The two regimes work very differently.
Turnover Tax — the simple path for smaller earners
If your annual gross revenue is below KES 5,000,000, you can register for Turnover Tax. The rate is 1.5% of gross revenue — no deductions, no complex calculations, no audited accounts.
You file monthly on iTax by the 20th of the following month. So for income received in January, you file and pay by 20 February. The payment goes via Mpesa Paybill 572572.
The trade-off: simplicity cuts both ways. If you had a rough month — you paid for equipment, bought materials, spent heavily on marketing — Turnover Tax doesn't care. You owe 1.5% of whatever came in, even if you made a loss. For freelancers with significant business costs, this can feel punishing.
Normal Business Income — more paperwork, often lower tax
If you opt out of Turnover Tax (or your revenue exceeds KES 5 million), your freelance income is taxed like employment income — on the net profit after allowable expenses, using the same PAYE bands.
Allowable expenses include: internet and phone costs, equipment depreciation, professional subscriptions, transport costs related to work, office supplies, professional fees paid to others. Keep receipts.
Under this regime, you pay instalment tax quarterly — in April, June, September, and December — and file an annual return by 30 June covering the previous calendar year.
A Worked Example: Which Route Actually Saves Money?
Say you earn KES 1,200,000 in freelance revenue in a year — about KES 100,000 per month. Here's how the maths shakes out under each regime.
| Scenario | Turnover Tax (1.5%) | Normal Regime |
|---|---|---|
| Gross Revenue | KES 1,200,000 | KES 1,200,000 |
| Deductible Expenses | Not applicable | KES 400,000 |
| Taxable Income | KES 1,200,000 | KES 800,000 |
| Tax Payable (approx.) | KES 18,000 | ~KES 118,000 (after personal relief) |
In this example, if you have KES 400,000 in real business expenses, you'd pay about KES 118,000 under the normal regime versus just KES 18,000 under Turnover Tax. Turnover Tax wins — by a wide margin.
Now flip the scenario. You're a purely online consultant — no equipment costs, no office, no travel. Your expenses are maybe KES 50,000 a year. Under the normal regime, you'd be taxed on KES 1,150,000 net profit, and the bill jumps significantly. Turnover Tax at KES 18,000 flat looks very attractive.
The rule of thumb: If your expenses exceed roughly 25–30% of your revenue, the normal regime is likely better. If you have very low costs relative to income, Turnover Tax is probably cheaper.
If you have both salary and freelance income, use our PAYE calculator to understand your employed income deductions first, then add freelance tax on top.
PAYE Calculator →Step-by-Step: How to Actually Pay Tax as a Freelancer
If you've been putting this off, here's what getting compliant actually looks like.
- Get a KRA PIN if you don't have one. Every adult Kenyan should have one. Visit itax.kra.go.ke and register. It's free and takes about 15 minutes. You'll need it for almost everything financial in Kenya — bank accounts, property transactions, government tenders, importing goods.
- Register for the right tax obligation. Log into iTax, go to Registration > Add Tax Obligation. If your annual revenue is below KES 5 million, register for Turnover Tax. If you're going the normal route, register for Business Income / Instalment Tax. You can only be on one regime at a time.
- Keep basic records. You don't need accounting software at small scale. A simple spreadsheet with two tabs — income received and expenses paid — will do. Record the date, the amount, and what it was for. Save digital copies of receipts (a WhatsApp forward of an M-Pesa confirmation counts).
- File on schedule. Turnover Tax: file monthly by the 20th. Normal regime: pay instalment tax in April, June, September, and December; file your annual return by 30 June each year.
- Pay via Mpesa Paybill 572572 or through your bank. The account number is your KRA PIN followed by the tax period. iTax generates the payment slip — follow it exactly.
What If You Also Have an Employed Job?
Many Kenyans run a side hustle alongside a formal job where PAYE is deducted. Here's what you need to know: the two income streams don't cancel each other out. They add up.
Your employer deducts PAYE on your salary and remits it to KRA monthly. That part is handled. But your freelance income is additional taxable income that sits on top. You're required to declare it on your annual return as business income.
This can push you into a higher tax band. If your salary already puts you at KES 500,000 per year in PAYE, and you then earn KES 800,000 in freelance income, your total taxable income is KES 1,300,000 — and you owe tax on all of it. The instalment tax system or Turnover Tax covers the freelance portion; your annual return reconciles everything.
Withholding Tax: The Deduction You Might Not Notice
Here's a wrinkle many freelancers miss entirely. If you invoice a company, an NGO, a government body, or any formal employer for services rendered, they are legally required to deduct Withholding Tax (WHT) before paying you. The rate is typically 5% for residents on professional and management fees.
So if you invoice KES 100,000 for a consulting project, you might receive KES 95,000 — and the client remits KES 5,000 directly to KRA on your behalf. They will give you a WHT certificate.
This is not your final tax bill. It's a prepayment. When you file your annual return, you claim the WHT certificates against your total tax due. If your WHT deductions exceed your final tax liability, you can apply for a refund (though that process takes time). If your tax liability is higher than the WHT paid, you top up the difference.
Keep every WHT certificate you receive. They're the proof that tax was paid on those invoices.
KRA Is Watching M-Pesa More Than It Used To
A common assumption among side hustlers: "All my clients pay me on M-Pesa. KRA can't see that." This was more true five years ago than it is today.
KRA has formal data-sharing arrangements with financial institutions and has been deepening its access to mobile money transaction data. The authority has also been known to send questionnaires or initiate audits triggered by mismatches — particularly when someone's lifestyle spending (loan applications, car purchases, property transactions) doesn't match their declared income.
This isn't meant to be alarmist. For most small-scale freelancers, the risk of an audit is low. But the risk of penalties when you do get flagged is not trivial.
Penalties for Not Filing
If you skip filing or pay late, the costs compound quickly.
- Late filing penalty: KES 2,000 per month for individuals, or 5% of the tax due — whichever is higher.
- Late payment interest: 1% per month on outstanding tax, compounding. A KES 50,000 tax bill ignored for two years becomes significantly more.
- Agency notice: KRA can write to your bank instructing them to freeze or deduct funds from your account to recover unpaid taxes. Banks are legally obliged to comply.
The good news: if you come forward voluntarily before KRA contacts you, the penalties are often more negotiable. Voluntary disclosure is always better than being caught.
Already employed? See exactly how much PAYE, NHIF, and NSSF your employer is deducting — and check whether the numbers on your payslip add up.
PAYE Calculator →The Honest Summary
Tax as a freelancer in Kenya is not as complex as many people fear, but it does require some basic organisation. The choice between Turnover Tax and the normal regime is the most meaningful decision you'll make — get that right and the rest is mostly paperwork.
If your annual revenue is below KES 5 million and you have low costs: register for Turnover Tax, file monthly, pay 1.5%. Done. If you have real business expenses that eat into your margins, run the numbers under both regimes — the normal route may save you significantly.
What you don't want to do is nothing. The M-Pesa era has made income more visible to KRA, not less. Staying compliant is cheaper than the alternative.