Subscribe to our free newsletter to read all our in-depth commentaries and to have the latest insights sent to your email
Register participation
Tax Legislation Alert: April 2026
Band-by-band impact on resident individual taxpayers, with worked arithmetic examples.
The Uganda Ministry of Finance has proposed a revision to the income tax bands applicable to resident individuals in Uganda for the 2026–27 fiscal year. These proposed amendments to the Income Tax Act are part of the broader raft of proposed amendments currently before parliament.
Taken together, the proposed PAYE thresholds suggest a deliberate attempt to ease pressure on employment income, especially at the lower end of the scale.
The principal effect of the proposal is an upward adjustment of the tax-free threshold and a reconfiguration of the lower and middle bands.
At a practical level, the proposal appears designed to reduce PAYE exposure for resident employees, particularly those in the lower-income brackets. For higher earners, the proposal still yields relief, although the benefit becomes fixed once income moves beyond a certain level.
This note compares the current resident individual thresholds against the proposed regime, and illustrates the effect on taxpayers falling within each band using worked examples.
1. Current resident individual income tax bands
Under the current law, resident individuals are taxed as follows:
- Not exceeding UGX 2,820,000(Annual chargeable income): Nil
- Exceeding UGX 2,820,000 but not exceeding UGX 4,020,000:
10% of the amount by which chargeable income exceeds UGX 2,820,000 - Exceeding UGX 4,020,000 but not exceeding UGX 4,920,000:
UGX 120,000 plus 20% of the amount by which chargeable income exceeds UGX 4,020,000 - Exceeding UGX 4,920,000:
UGX 300,000 plus 30% of the amount by which chargeable income exceeds UGX 4,920,000 - Where chargeable income exceeds UGX 120,000,000:
an additional 10% is charged on the amount by which chargeable income exceeds UGX 120,000,000
2. Proposed resident individual income tax bands for 2026–27
The new tax-free threshold is UGX 335,000 per month (up from UGX 235,000). Therefore, under the proposal, resident individuals would be taxed as follows:
- Not exceeding UGX 4,020,000: Nil
- Exceeding UGX 4,020,000 but not exceeding UGX 4,920,000:
20% of the amount by which chargeable income exceeds UGX 4,020,000 - Exceeding UGX 4,920,000 but not exceeding UGX 5,820,000:
UGX 180,000 plus 25% of the amount by which chargeable income exceeds UGX 4,920,000 - Exceeding UGX 5,820,000 but not exceeding UGX 120,000,000:
UGX 405,000 plus 30% of the amount by which chargeable income exceeds UGX 5,820,000 - Where chargeable income exceeds UGX 120,000,000:
an additional 10% is charged on the amount by which chargeable income exceeds UGX 120,000,000
3. Immediate policy effect
The most significant change is that the tax-free threshold increases from UGX 2,820,000 to UGX 4,020,000.
In practical terms, this means:
- taxpayers earning between UGX 2,820,000 and UGX 4,020,000 move from being taxable to being fully exempt;
- taxpayers in the UGX 4,020,000 to UGX 4,920,000 range continue to be taxed, but at a lower overall liability than under the current regime;
- taxpayers in the UGX 4,920,000 to UGX 5,820,000 range benefit from both a lower entry point into the 30% band and a 25% intermediate band;
- taxpayers above UGX 5,820,000 continue to be taxed at 30%, but with a reduced base tax compared to the current law;
- the additional 10% charge above UGX 120,000,000 remains intact.
On the face of the proposed bands, there is no category of resident taxpayer that becomes worse off. The proposal either leaves the taxpayer in the same position or reduces the tax burden.
4. Worked examples by band
Taxpayer A: income within the nil band
Assume Taxpayer A has annual chargeable income of UGX 2,500,000.
Current law
Since UGX 2,500,000 does not exceed UGX 2,820,000:
PAYE = Nil
Proposed law
Since UGX 2,500,000 does not exceed UGX 4,020,000:
PAYE = Nil
Effect
- Current liability: UGX 0
- Proposed liability: UGX 0
Result: No change.
Taxpayer B: income currently taxed at 10%, but exempt under the proposal
Assume Taxpayer B has annual chargeable income of UGX 3,600,000.
Current law
This falls in the band exceeding UGX 2,820,000 but not exceeding UGX 4,020,000.
Excess above UGX 2,820,000:
UGX 3,600,000 – UGX 2,820,000 = UGX 780,000
Tax payable:
10% × UGX 780,000 = UGX 78,000
Proposed law
Since UGX 3,600,000 does not exceed UGX 4,020,000:
PAYE = Nil
Effect
- Current liability: UGX 78,000
- Proposed liability: UGX 0
Result: Taxpayer B enjoys a decrease of UGX 78,000.
Taxpayer C: income in the UGX 4,020,000–UGX 4,920,000 band
Assume Taxpayer C has annual chargeable income of UGX 4,500,000.
Current law
This falls in the band exceeding UGX 4,020,000 but not exceeding UGX 4,920,000.
Base tax: UGX 120,000
Excess above UGX 4,020,000:
UGX 4,500,000 – UGX 4,020,000 = UGX 480,000
Additional tax:
20% × UGX 480,000 = UGX 96,000
Total PAYE:
UGX 120,000 + UGX 96,000 = UGX 216,000
Proposed law
This falls in the band exceeding UGX 4,020,000 but not exceeding UGX 4,920,000.
Excess above UGX 4,020,000:
UGX 4,500,000 – UGX 4,020,000 = UGX 480,000
Tax payable:
20% × UGX 480,000 = UGX 96,000
Effect
- Current liability: UGX 216,000
- Proposed liability: UGX 96,000
Result: Taxpayer C enjoys a decrease of UGX 120,000.
Taxpayer D: income in the new 25% middle band
Assume Taxpayer D has annual chargeable income of UGX 5,400,000.
Current law
This falls in the band exceeding UGX 4,920,000.
Base tax: UGX 300,000
Excess above UGX 4,920,000:
UGX 5,400,000 – UGX 4,920,000 = UGX 480,000
Additional tax:
30% × UGX 480,000 = UGX 144,000
Total PAYE:
UGX 300,000 + UGX 144,000 = UGX 444,000
Proposed law
This falls in the band exceeding UGX 4,920,000 but not exceeding UGX 5,820,000.
Base tax: UGX 180,000
Excess above UGX 4,920,000:
UGX 5,400,000 – UGX 4,920,000 = UGX 480,000
Additional tax:
25% × UGX 480,000 = UGX 120,000
Total PAYE:
UGX 180,000 + UGX 120,000 = UGX 300,000
Effect
- Current liability: UGX 444,000
- Proposed liability: UGX 300,000
Result: Taxpayer D enjoys a decrease of UGX 144,000.
Taxpayer E: income above UGX 5,820,000 but below UGX 120,000,000
Assume Taxpayer E has annual chargeable income of UGX 60,000,000.
Current law
Base tax: UGX 300,000
Excess above UGX 4,920,000:
UGX 60,000,000 – UGX 4,920,000 = UGX 55,080,000
Additional tax:
30% × UGX 55,080,000 = UGX 16,524,000
Total PAYE:
UGX 300,000 + UGX 16,524,000 = UGX 16,824,000
Proposed law
Base tax: UGX 405,000
Excess above UGX 5,820,000:
UGX 60,000,000 – UGX 5,820,000 = UGX 54,180,000
Additional tax:
30% × UGX 54,180,000 = UGX 16,254,000
Total PAYE:
UGX 405,000 + UGX 16,254,000 = UGX 16,659,000
Effect
- Current liability: UGX 16,824,000
- Proposed liability: UGX 16,659,000
Result: Taxpayer E enjoys a decrease of UGX 165,000.
Taxpayer F: income above UGX 120,000,000
Assume Taxpayer F has annual chargeable income of UGX 150,000,000.
Current law
Base PAYE before the extra 10% charge:
Base tax: UGX 300,000
Excess above UGX 4,920,000:
UGX 150,000,000 – UGX 4,920,000 = UGX 145,080,000
Additional tax at 30%:
30% × UGX 145,080,000 = UGX 43,524,000
Subtotal:
UGX 300,000 + UGX 43,524,000 = UGX 43,824,000
Additional 10% surcharge:
Excess above UGX 120,000,000:
UGX 150,000,000 – UGX 120,000,000 = UGX 30,000,000
10% × UGX 30,000,000 = UGX 3,000,000
Total PAYE:
UGX 43,824,000 + UGX 3,000,000 = UGX 46,824,000
Proposed law
Base PAYE before the extra 10% charge:
Base tax: UGX 405,000
Excess above UGX 5,820,000:
UGX 150,000,000 – UGX 5,820,000 = UGX 144,180,000
Additional tax at 30%:
30% × UGX 144,180,000 = UGX 43,254,000
Subtotal:
UGX 405,000 + UGX 43,254,000 = UGX 43,659,000
Additional 10% surcharge:
Excess above UGX 120,000,000:
UGX 150,000,000 – UGX 120,000,000 = UGX 30,000,000
10% × UGX 30,000,000 = UGX 3,000,000
Total PAYE:
UGX 43,659,000 + UGX 3,000,000 = UGX 46,659,000
Effect
- Current liability: UGX 46,824,000
- Proposed liability: UGX 46,659,000
Result: Taxpayer F enjoys a decrease of UGX 165,000.
5. Summary of impact by taxpayer category
The proposed changes affect resident taxpayers as follows:
(a) Income not exceeding UGX 2,820,000
There is no change. These taxpayers remain outside the charge to PAYE.
(b) Income between UGX 2,820,000 and UGX 4,020,000
This category sees the clearest benefit. Under the current law, tax is payable at 10% on the excess above UGX 2,820,000. Under the proposed regime, that same income is fully exempt. This class of taxpayers moves entirely out of PAYE.
(c) Income between UGX 4,020,000 and UGX 4,920,000
This category remains taxable, but liability is lower by UGX 120,000 compared to the current law.
(d) Income between UGX 4,920,000 and UGX 5,820,000
This group benefits from the introduction of a 25% intermediate band before the 30% band applies. The tax saving for this class ranges from UGX 120,000 to UGX 165,000, depending on the taxpayer’s exact income position within that band.
(e) Income above UGX 5,820,000
From this level upward, the saving effectively stabilises at UGX 165,000 per annum.
(f) Income above UGX 120,000,000
These taxpayers continue to face the additional 10% charge on income above UGX 120,000,000. However, they still benefit from the reduced base PAYE, resulting in an overall annual saving of UGX 165,000.
6. Key observations
1. The proposal is clearly relief-oriented
The structure of the amendment suggests an attempt to ease the burden on lower-income earners by expanding the nil band and slightly improving the position of middle- and higher-income resident employees.
2. The largest relative benefit goes to lower-income employees
Those earning between UGX 2,820,000 and UGX 4,020,000 move from paying tax to paying none at all. In proportional terms, this is the most meaningful reduction.
3. Higher earners do benefit, but only modestly
Although taxpayers above UGX 5,820,000 still obtain relief, the annual benefit settles at UGX 165,000, which becomes less significant as income rises.
4. The top-end surcharge remains intact
The additional 10% applicable to income above UGX 120,000,000 is retained. The proposal therefore does not materially reduce progressivity at the upper end; it only slightly softens the base PAYE burden.
5. Payroll systems will need updating
Assuming the amendment is enacted in its present form, employers will need to update payroll configurations and PAYE deduction tables to reflect the new thresholds.
7. Conclusion
The proposed 2026–27 amendments to the resident individual income tax bands would reduce PAYE liabilities across all taxable resident bands, with no apparent category suffering an increase.
if enacted in substantially this form, the proposal should mean less PAYE for resident employees, not more. The real winners are those closest to the bottom of the tax net. Everyone else benefits too, but with diminishing relative effect as income rises.
The main policy shift is the increase in the tax-free threshold from UGX 2,820,000 to UGX 4,020,000, which entirely removes many lower-income earners from the PAYE net. For middle-income and higher-income taxpayers, the relief is still positive, though more modest, eventually stabilising at UGX 165,000 annually.
From a policy perspective, the amendment appears to be aimed at easing the burden on employment income, especially at the lower end of the scale, while largely preserving the broader progressive structure of the resident PAYE regime. End
Disclaimer: This briefing note is based on draft legislative bill excerpts and is shared for analysis and review purposes only. The final legal and payroll position should be confirmed against the enacted amendment text, if and when passed by parliament, at which point we will be available to offer further implementing guidance as might be required.
Market Rankings:
EXLORE ALL OUR IN-DEPTH INSIGHTS HERE
Discover more from MRT Tax
Subscribe to get the latest posts sent to your email.