I hate taxes. But I can’t avoid them and I am sure neither can you. Anything you buy in this country very likely has some form of tax imposed on it.
Have you been to the supermarket lately? Maybe you spent Sh1,000 there but in the real sense, you walked out with goods worth Sh862 having paid Sh138 as Value Added Tax (VAT).
It gets even worse if you are employed because the more you make, the higher tax percentage you pay. Thus, if you make Sh100,000, you will pay Sh22,332.30 as PAYE.
This works out to about 22.3% of your earnings. Goodness, that has to hurt! Nevertheless, how about we find a few legal ways to avoid paying so much tax?
1. Contribute to a registered retirement/pension scheme
Quick one, pull out your payslip. Do you notice that NSSF contribution is deducted from your salary prior to calculating your taxable income? The government does this to incentivise people in formal employment to save money for their retirement.
Therefore, you are allowed to contribute up to a maximum of Sh20,000 per month tax-free in a registered pension scheme. How does this help with your taxes? Easy! Instead of paying taxes on the Sh100,000, you now pay taxes on 100,000 – 20,000 = 80,000.
Your total tax bill will be SH16,656.3 resulting in a saving of Sh5,676 which would have gone to the public coffers.
2. Get a mortgage
You are entitled to mortgage relief where you can deduct the interest portion of your repayment from your gross income. This is capped at Sh25,000 per month or Sh300,000 per year.
This essentially means that if you are paying Sh25,000 as interest on the loan you took to purchase a home, you can deduct this so as to arrive at your taxable income.
Thus, if you make Sh100,000, you can deduct Sh25,000 from this, and you only have to pay taxes on Sh75,000 and you end up saving Sh7,500.
3. Get insured
Did you know that if you take up an education plan for your kids’ education, you should get a reduction in what you pay as PAYE?
The education policy should be at least 10 years long. I assure you, 10 years will be over very quickly.
Should you take on life insurance, you are entitled to get a 15% tax relief per the premium paid meaning; if your premium is Sh10,000, you get Sh1,500 per month relief.
This is capped at Sh5,000 per month of Sh60,000 per year. Think about it, what would you do with an extra Sh60,000 in your pocket in December? Did someone say party?
Please note: Tax avoidance in this article refers only to minimizing tax liability within the remits set out by Kenyan law and does not in any way condone or encourage tax evasion. E&OE apply.
#hivisasaoriginal #Upekuzi