# Housing Levy Employer Contribution in Kenya

> Kenya employers pay 1.5% Housing Levy on top of salary. Learn the salary base, employee deduction, iTax filing, payment deadline and PAYE treatment.

Original page: https://cazini.co.ke/guides/housing-levy-employer-contribution-kenya  
Updated: 2026-11-15 · Cazini (Paul Omondi)

An employer in Kenya contributes 1.5% of each employee’s gross monthly salary to the Affordable Housing Levy, matching the employee’s 1.5% deduction. The employer contribution is an additional employment cost, not another deduction from the employee’s salary. The employer remits both shares to KRA by the ninth working day after the end of the relevant month.

## Separate the Employer Cost from the Employee Deduction

Use the same Housing Levy salary base for both contributions, but keep them separate in payroll and accounting. KRA’s collection notice confirms that the employer deducts the employee contribution and provides a matching contribution.

| Payroll item | Calculation | Who bears the cost? |
| --- | --- | --- |
| Employee Housing Levy | 1.5% of gross monthly salary | Employee, deducted through payroll |
| Employer Housing Levy | 1.5% of gross monthly salary | Employer, on top of salary |

Do not deduct the combined remittance from the employee. Equally, do not treat the employer share as though it has already been funded by the employee deduction.

For budgeting, show agreed gross salary and employer AHL as separate lines. This is only the Housing Levy portion of employment cost, not a complete cost-to-company calculation. Keep other employer costs distinct in your [payroll process](https://cazini.co.ke/payroll) so an AHL calculation is not mistaken for the entire hiring budget.

## What Counts as Gross Monthly Salary?

KRA’s AHL clarification defines the base as basic salary plus regular cash allowances. It specifically includes housing, travel or commuter, and car allowances, alongside similar regular cash payments.

That means neither basic salary alone nor every item on a payslip is automatically the correct base. Map your pay codes to the KRA definition before calculating contributions.

### Use a Payment Classification Test

Apply the following test to each payroll item:

- **Basic salary:** include it in the AHL base.
- **Regular cash allowance:** include it, including regular housing, travel or commuter, and car allowances.
- **Non-cash payment:** exclude it under KRA’s clarification.
- **Irregular payment:** check the clarification’s exclusions, including leave allowance, bonus, gratuity, pension, severance pay and other terminal dues or benefits.

| Pay item | KRA AHL treatment | Payroll control |
| --- | --- | --- |
| Basic salary | Included | Map the basic salary code to the levy base |
| Regular cash housing, commuter, travel or car allowance | Included | Check recurring allowance codes |
| Non-cash payment | Excluded | Keep it outside the AHL calculation |
| Leave allowance, bonus, gratuity, pension, severance and other terminal dues or benefits | Excluded under KRA’s clarification on irregular payments | Separate these from ordinary salary in the payroll record |

Do not rely on a payment label alone. If a pay code bundles regular cash remuneration with an excluded item, split the components and retain the classification rationale. For an unusual payment that does not fit the published categories clearly, seek clarification rather than silently changing the base.

### Handle Final Pay and Corrections Carefully

A leaving employee’s settlement can contain both ordinary salary and terminal payments. Separate the components instead of applying a single AHL treatment to the entire settlement.

For joiners, leavers, back-pay and corrections, record the salary period, payment components and reason for any adjustment. The supplied KRA guidance does not establish a special proration or back-pay correction formula, so do not invent one. Confirm uncertain treatment with KRA before finalising the adjustment.

## Employee PAYE and Employer Tax Treatment

### Employee AHL Reduces Taxable Employment Income

KRA’s PAYE amendment notice states that, from 27 December 2024 and for December 2024 PAYE onward, deducted AHL is allowable when determining taxable employment income.

The practical sequence is to establish the AHL salary base, calculate the employee deduction, then recognise that deduction when determining taxable employment income for PAYE. Do not calculate AHL from the amount remaining after PAYE.

A deduction from taxable income is not a tax credit. It does not mean the employee receives the full levy back through lower PAYE. Use the [Kenya PAYE calculator](https://cazini.co.ke/tools/kenya-paye-calculator) to explain the employee side of an offer without confusing take-home pay with employer cost.

[Kenya PAYE calculator](https://cazini.co.ke/tools/kenya-paye-calculator) - work out net pay and every deduction for any salary.

### Employer AHL Is a Separate Business Deduction

KRA confirms that the employer contribution is an allowable deduction under section 15 of the Income Tax Act. Record it as an employer expense, separate from the employee amount withheld.

This tax treatment does not reduce the amount you remit to KRA. Nor does it turn the employer contribution into an employee payroll deduction.

### Do Not Carry Forward Historic Housing Relief

KRA’s individual-return guide records Affordable Housing Relief as applicable only for March to November 2024. Keep that historic relief period separate from the taxable-income deduction used for December 2024 PAYE onward.

When reviewing an older payroll template, check the calculation logic, not just the heading. A field still labelled “housing relief” may conceal an outdated treatment.

## How to Declare and Pay AHL on iTax

### Employers with a PAYE Obligation

KRA’s published workflow is to declare AHL in Sheet M of the iTax PAYE return. Then generate a separate payment slip under Tax Head “Agency Revenue” and Tax Sub-head “Housing Levy.”

Use this monthly control sequence:

- Finalise the employee-level AHL salary bases and both contribution amounts.
- Reconcile the employee deductions and matching employer contributions to payroll totals.
- Declare AHL in Sheet M of the PAYE return.
- Generate the separate Housing Levy payment slip using the specified tax head and sub-head.
- Pay the combined employee and employer amount.
- Retain the submitted return, payment slip, payment evidence and payroll reconciliation.

Declaring AHL within the PAYE return does not mean the PAYE payment slip covers it. KRA’s implementation guide expressly says the Housing Levy payment slip is generated separately from PAYE and other payroll contributions.

### Employers Without a PAYE Obligation

KRA’s guide provides a payment route for employers without a PAYE obligation: iTax Payments > Payment Registration, followed by Agency Revenue > Housing Levy.

Do not treat the absence of a PAYE filing obligation as a reason to omit the matching employer AHL contribution. Use the applicable KRA payment route and retain the same contribution reconciliation.

## Deadline and Late-Payment Penalty

The deadline is the ninth working day after the end of the month in which gross salary was due or income was received or accrued. It is not simply the ninth calendar day of the following month.

Build the deadline from month-end using working days, accounting for weekends and public holidays rather than hard-coding a calendar date. Set an internal payment date earlier than the statutory deadline so approval or payment problems can be resolved.

KRA’s AHL implementation guide states that late payment attracts a penalty of 3% of the unpaid amount for every month, or part of a month, it remains unpaid. Do not assume a short delay is penalty-free.

## Keep an Audit-Ready AHL Reconciliation

Your monthly file should connect pay components to the levy base, the base to both contributions, and those contributions to the declaration and payment.

In the ledger, the employee deduction creates an AHL payable from salary withheld. The employer contribution creates an employer expense and an additional AHL payable. Payment then clears the combined payable.

Before closing payroll, investigate any mismatch between employee and employer contributions, any included non-cash benefit, and any excluded recurring cash allowance. Keep adjustment explanations with the relevant payroll period so the next reviewer can reproduce the calculation.

## Sources

[Kenya Revenue Authority - Collection of Affordable Housing Levy](https://www.kra.go.ke/news-center/public-notices/2099-collection-of-the-affordable-housing-levy-by-kenya-revenue-authority-2) - Employee and employer rates, remittance deadline, Sheet M, payment classification and employer tax deduction.

[Kenya Revenue Authority - Affordable Housing Levy Clarification](https://www.kra.go.ke/news-center/public-notices/1979-affordable-housing-levy-ahl) - Gross monthly salary definition and included and excluded payments.

[Kenya Revenue Authority - AHL Step-by-Step Guide](https://www.kra.go.ke/images/publications/AHL-Step-By-Step-Final-130524.pdf) - Separate payment slip, non-PAYE employer route, late-payment penalty and employer gross-income exemption.

[Kenya Revenue Authority - Amendments to PAYE Computation](https://www.kra.go.ke/news-center/public-notices/2157-amendments-to-paye-computation-pursuant-to-the-tax-laws-amendment-act%2C-2024) - Employee AHL deductibility and the December 2024 payroll change.

[Kenya Revenue Authority - ITR 2024 User Guide](https://www.kra.go.ke/images/publications/USER-GUIDE-FOR-ITR-2024.pdf) - Historic Affordable Housing Relief period.

## Frequently asked questions

### How much does an employer contribute to Housing Levy in Kenya?

The employer contributes 1.5% of each employee’s gross monthly salary, matching the employee’s 1.5% contribution. The employer remits both amounts to KRA, but only the employee share comes out of the employee’s salary.

### Which allowances and benefits attract Housing Levy?

KRA includes basic salary and regular cash allowances, including housing, travel or commuter, and car allowances. Its clarification excludes non-cash payments and irregular payments, including leave allowance, bonus, gratuity, pension, severance pay and other terminal dues or benefits. Payroll should classify each payment rather than apply the levy to every item in a final settlement.

### Is Housing Levy due on the ninth calendar day?

No. KRA states that remittance is due by the ninth working day after the end of the month in which gross salary was due or income was received or accrued. Build the payroll calendar around working days rather than assuming a fixed calendar date.

### Does Housing Levy reduce PAYE?

For December 2024 PAYE onward, the employee’s deducted Affordable Housing Levy is deductible when determining taxable employment income. It reduces taxable pay, not tax shilling for shilling. The employer contribution is separately an allowable business deduction under section 15 of the Income Tax Act.

### Must an employer also pay Housing Levy on business gross income?

KRA’s implementation guide says a person with gross income who is also an employer and deducts and pays AHL for employees is exempt from paying AHL again on that employer’s gross income under section 5(2) of the Affordable Housing Act. That exemption does not remove the employee deductions or matching employer contributions. Keep evidence of staff AHL declarations and payments when applying this treatment.