The short answer
PAYE (Pay As You Earn) is the tax a Ugandan employer deducts from an employee’s monthly salary and remits to URA. From 1 July 2026, a resident employee’s first UGX 335,000 of monthly pay is tax free, the next slice up to UGX 410,000 is taxed at 20%, the slice up to UGX 485,000 at 25%, and everything above UGX 485,000 at 30%, with an extra 10% on the part of monthly pay above UGX 10,000,000.
The employer deducts PAYE on every payslip and pays it to URA by the 15th of the following month, alongside NSSF (5% from the employee, 10% from the employer) and, once a year, Local Service Tax. This page sets out the exact bands, three worked examples and the filing deadline. It is not tax advice, and for a ruling on your own payroll you should confirm with URA or a licensed tax adviser.
Who deducts PAYE, and on what income
The employer deducts PAYE, not the employee. Any business with at least one member of staff on its payroll, a shop, a restaurant, a clinic or an office, must register as an employer with URA, withhold PAYE from every salary, wage, bonus and commission paid, and remit it monthly.
PAYE applies to cash pay and to most benefits in kind. A director or manager who takes part of their pay as a company car, housing or a soft loan still owes PAYE on the value of that benefit, not only on the cash portion.
Resident and non-resident employees
The bands below apply to resident individuals. A non-resident employee has no tax-free band at all: the first UGX 335,000 of monthly pay is taxed at a flat 10%, the next slice to UGX 410,000 at 20%, and everything above UGX 410,000 at 30%, plus the same 10% surcharge above UGX 10,000,000 a month. Confirm an employee’s residency status before applying either table, since getting it wrong under-deducts or over-deducts tax.
Use our PAYE calculator for Uganda to check a single payslip instantly once you know which table applies.
PAYE rates in Uganda for 2026
Uganda’s PAYE bands changed on 1 July 2026 under the Income Tax (Amendment) Act 2026: the tax-free threshold rose from UGX 235,000 to UGX 335,000 a month, and a new 25% band was added. The table below is what URA’s own PAYE rates page showed for resident individuals, monthly, as checked on 19 September 2026.
| Monthly pay band | Rate | PAYE due on that band |
|---|---|---|
| UGX 0 to 335,000 | Nil | Nil |
| UGX 335,001 to 410,000 | 20% | 20% of the amount above UGX 335,000 |
| UGX 410,001 to 485,000 | 25% | UGX 15,000 plus 25% of the amount above UGX 410,000 |
| UGX 485,001 to 10,000,000 | 30% | UGX 33,750 plus 30% of the amount above UGX 485,000 |
| Above UGX 10,000,000 | 30% + 10% surcharge | UGX 33,750 plus 30% of the amount above UGX 485,000, plus 10% of the amount above UGX 10,000,000 |
PAYE bands, annual
For annual payroll or year-end figures, the same bands scale up twelve times: nil up to UGX 4,020,000 a year, 20% up to UGX 4,920,000, 25% up to UGX 5,820,000, 30% above that, and the extra 10% surcharge applies above UGX 120,000,000 a year.
These rates changed alongside other 2026 tax updates. See our guide to Uganda’s 2026 tax changes for what else moved in VAT, EFRIS and other returns this year.
How to calculate PAYE in Uganda: three worked examples
To calculate PAYE by hand, find which band the employee’s gross monthly pay falls into, then apply that band’s rule from the table above. Three real examples, computed on the bands effective 1 July 2026:
- Gross pay UGX 500,000. This falls in the 485,001+ band. PAYE = UGX 33,750 + 30% x (500,000 minus 485,000) = UGX 33,750 + 4,500 = UGX 38,250. Net pay: UGX 461,750. Effective rate: 7.65% of gross.
- Gross pay UGX 1,500,000. PAYE = UGX 33,750 + 30% x (1,500,000 minus 485,000) = UGX 33,750 + 304,500 = UGX 338,250. Net pay: UGX 1,161,750. Effective rate: 22.55% of gross.
- Gross pay UGX 5,000,000. PAYE = UGX 33,750 + 30% x (5,000,000 minus 485,000) = UGX 33,750 + 1,354,500 = UGX 1,388,250. Net pay: UGX 3,611,750. Effective rate: 27.77% of gross. This is still below the UGX 10,000,000 threshold, so no surcharge applies.
For anything above UGX 10,000,000 a month, add a further 10% on only the amount above that threshold, on top of the UGX 33,750 plus 30% already worked out above. If you run payroll for more than a handful of staff, payroll software applies these bands automatically and keeps a record for every pay run, which matters if URA ever asks how a figure was reached.
Benefits in kind, allowances and secondary employment
PAYE is not only charged on cash salary. URA treats several non-cash benefits as taxable pay, valued as follows:
- Company vehicle for private use: 20% of the vehicle’s value when first provided (depreciated at 35% a year on a reducing balance), multiplied by the share of the year it was available for private use, minus anything the employee pays for it.
- Employer-provided housing: the lower of the market rent (minus anything the employee pays) or 15% of the employee’s total employment income for the year, including the housing benefit itself.
- A staff loan over UGX 1,000,000 at below the Bank of Uganda statutory rate: the interest that would have applied at the statutory rate, minus interest actually paid, pro-rated for the months the loan ran.
- Other benefits: domestic help paid by the employer, a debt to the employer that is waived, employer property or services used by the employee, and employer-paid utilities at the employee’s home, each valued at cost or market value and reduced by what the employee pays.
PAYE on allowances: what is exempt
Some employment income is exempt from PAYE, including reimbursed medical expenses and insurance premiums, travel and subsistence allowances while an employee is working away from their usual place of work (up to the actual or likely cost), meals in a staff canteen open to everyone, any single benefit worth under UGX 10,000 in a month, employer contributions to a statutory retirement fund, and, for staff with 10 or more years of service, 25% of a gratuity payment (the remaining 75% is taxable). Everything else counts as pay and is taxed at the normal bands.
Secondary employment
An employee with more than one job must tell each employer which one is their main, or primary, job. The primary employer applies the normal bands above. Every other employer must withhold PAYE at a flat rate instead: URA’s own website currently states this flat rate as 30%, though some 2026 press coverage citing URA describes it as the historical top marginal rate, reported as 40%. The two do not agree, so confirm the exact secondary-employment rate with URA or your payroll provider before applying one figure to a second job.
PAYE, NSSF and Local Service Tax together
Three separate deductions come off a Ugandan payslip, and it is easy to mix them up:
- PAYE: the income tax bands above, deducted every month and paid to URA.
- NSSF: 15% of gross monthly pay in total, 5% deducted from the employee and 10% paid by the employer on top, due to NSSF by the 15th of the following month. Every employer with one or more employees must register, whatever the business’s size.
- Local Service Tax (LST): a local government tax, not URA’s, of UGX 5,000 to UGX 100,000 a year depending on pay (KCCA, checked September 2026), due to the employee’s local authority within the first four months of the financial year (by 31 October). Late or non-payment is penalised at 50% of the LST due. Kampala’s own guide gives a worked example where LST is deducted from gross pay before PAYE is calculated on what is left; confirm with your payroll software or a tax adviser whether that is how your own payroll is set up.
Handled correctly, PAYE, NSSF and LST are three lines on one payslip, not three separate systems to manage by hand. This is exactly what payroll software or a proper HR and payroll module should calculate and file for you every month.
The PAYE deadline, how to file, records and penalties
PAYE withheld from a payroll month is due to URA by the 15th of the following month, for example January’s PAYE by 15 February. It is filed and paid online, the same way as VAT and most other URA returns.
Records to keep
For every employee, keep the gross pay, the PAYE deducted, the NSSF deducted, any LST deducted, the net pay, and proof that each amount reached URA, NSSF and the local authority. Clean monthly records are what you need if URA reviews your payroll, or if you want to query an assessment. See business record keeping in Uganda for a fuller checklist that applies beyond payroll.
Penalties for late filing or late payment
Industry guides describe the PAYE penalty using the same shape as URA’s confirmed VAT penalty: UGX 200,000 or 2% of the unpaid tax a month, whichever is higher, plus 2% monthly interest on the amount still owed. URA has not published this exact PAYE figure on its own PAYE page, so treat it as a strong guide rather than a guaranteed number, and confirm the live figure with URA or a tax adviser before relying on it for a real penalty. A business can apply to URA for an extension of time to file, but the extension cannot run longer than 90 days in total and does not move the date the tax itself is due.
If a PAYE penalty has landed, or your deadline is days away
If URA has already issued a penalty or assessment for late or unpaid PAYE: read the notice for the exact amount, the tax periods it covers, and the date you must respond by. Pull together your payroll register and proof of remittance for those months before doing anything else, and decide whether the figure looks right. Do not ignore the notice; a missed response date narrows your options.
If today is the 15th and you have not filed: file and pay what you can now rather than waiting until the figure is exact, since interest runs monthly on whatever remains unpaid. You can ask URA for an extension of time to file, but it caps at 90 days and does not move the payment date itself.
Growth Informer Software Services is registered with URA as a tax agent. We can review a PAYE notice or assessment, help you file correctly going forward, lodge an objection if the figure is wrong, or represent you in a dispute with URA. We quote after seeing the notice or your books, never before. If you would rather your payroll ran on software that calculates and records PAYE, NSSF and LST for you, see Growth Informer Business, our own cloud POS and business management platform, or talk to us about HR and payroll system development built around your own rules.
Frequently asked questions
What are the PAYE rates in Uganda right now?
From 1 July 2026, a resident employee's first UGX 335,000 of monthly pay is tax free, then 20% up to UGX 410,000, 25% up to UGX 485,000, and 30% above that, plus an extra 10% on the part of monthly pay above UGX 10,000,000. See the table above for the exact bands, as URA published them, checked 19 September 2026.
How do I calculate PAYE in Uganda?
Find the band your employee's gross monthly pay falls into, then apply that band's formula. For gross pay of UGX 1,500,000: PAYE = UGX 33,750 plus 30% of the amount above UGX 485,000, which comes to UGX 338,250. Our PAYE calculator does this for you instantly.
When is the PAYE return deadline in Uganda?
PAYE withheld in a payroll month is due to URA by the 15th of the following month, for example January's PAYE by 15 February. Filing or paying late adds a penalty and monthly interest, so file even a provisional figure rather than missing the date.
Is PAYE charged on allowances and benefits in kind?
Yes, on most of them. A company car, employer housing, a cheap staff loan and several other non-cash benefits are valued and taxed under PAYE. Some allowances are exempt, including reimbursed medical costs, genuine travel and subsistence allowances up to actual cost, and any single benefit worth under UGX 10,000 a month.
What is Local Service Tax and how is it different from PAYE?
Local Service Tax (LST) is a separate local government tax of UGX 5,000 to UGX 100,000 a year, based on pay, due by 31 October each year, not a monthly URA tax like PAYE. Employers deduct it from staff and remit it to the local authority, and late payment is penalised at 50% of the amount due.
What is the NSSF deduction and how does it relate to PAYE?
NSSF is 15% of gross monthly pay in total, 5% deducted from the employee and 10% added by the employer, due by the 15th of the following month, the same date as PAYE. It is a separate contribution to the employee's retirement savings, not part of the PAYE calculation itself.