The Parliament of Uganda has passed the Income Tax (Amendment) Bill, 2026, introducing key changes aimed at easing the tax burden on low-income earners and supporting business growth.
Under the new law, the monthly Pay As You Earn (PAYE) tax-free threshold has been increased from Shs235,000 to Shs335,000, effectively exempting more workers from income tax.
“Parliament has passed the Income Tax (Amendment) Bill, 2026 that will, among others, exempt employees who earn up to Shs335,000 per month from PAYE,” Parliament said in a statement. “The existing tax-free threshold is Shs235,000.”
The amendment is expected to provide relief to low-income earners by increasing disposable income and cushioning households against rising living costs.
In addition to the PAYE adjustment, lawmakers also deleted Clause 8 of the Bill, which had proposed a minimum tax on businesses even when they carry forward losses. The removal of this clause is seen as a measure to support struggling businesses and encourage investment, particularly among small and medium enterprises.
The legislation further expands the list of tax-exempt institutions, adding entities such as the Arab Bank for Economic Development in Africa and the Uganda Red Cross Society.
The changes form part of broader fiscal policy adjustments by the government to stimulate economic activity while maintaining a balance between revenue mobilisation and taxpayer relief.
The Bill now awaits assent by President Yoweri Kaguta Museveni to become law.
