The Income Tax (Amendment) Act 2026, effective July 1, 2026, introduced significant changes to Uganda's Pay-As-You-Earn (PAYE) tax structure. Here's what changed and how it affects your take-home pay.
New Tax Bands (Effective July 2026)
| Monthly Chargeable Income (UGX) | Tax Rate |
|---|---|
| Up to 335,000 | 0% |
| 335,001 – 500,000 | 10% |
| 500,001 – 2,000,000 | 20% |
| 2,000,001 – 10,000,000 | 25% (new) |
| Above 10,000,000 | 30% |
Key Changes
1. Tax-Free Threshold Raised
The threshold increased from UGX 235,000 to UGX 335,000 per month — a 42.5% increase. This means workers earning up to 335,000 monthly now pay zero PAYE.
2. New 25% Band
A new tax band was introduced for monthly incomes between UGX 2,000,001 and UGX 10,000,000 at 25%. Previously, this range was taxed at the top rate of 30%.
3. Top Rate Unchanged
Income above UGX 10,000,000 per month continues to be taxed at 30%.
Practical Examples
Example 1: Monthly Salary of UGX 500,000
- Tax-free: 335,000
- Chargeable: 165,000
- Tax: 165,000 × 10% = UGX 16,500
- Effective rate: 3.3%
Example 2: Monthly Salary of UGX 2,000,000
- First 335,000: 0%
- Next 165,000 (335k–500k): 10% = 16,500
- Remaining 1,500,000 (500k–2M): 20% = 300,000
- Total tax: UGX 316,500
- Effective rate: 15.8%
Example 3: Monthly Salary of UGX 5,000,000
- First 335,000: 0%
- Next 165,000: 10% = 16,500
- Next 1,500,000: 20% = 300,000
- Next 3,000,000: 25% = 750,000
- Total tax: UGX 1,066,500
- Effective rate: 21.3%
Use Our Calculator
We've updated our PAYE Calculator with the new bands. Enter your gross monthly salary to see your exact tax, NSSF deductions, and net pay.
Why This Matters
The reforms put more money in the hands of lower and middle-income earners. If you earn UGX 2,000,000 per month, your annual tax savings compared to the old bands is approximately UGX 432,000.
Note: This article is for informational purposes. Consult URA or a tax professional for advice specific to your situation.