The short answer
Payroll services in Uganda means calculating PAYE at the current bands, deducting and remitting NSSF and Local Service Tax, issuing payslips, and filing with URA and NSSF by the 15th of the following month, every month, without missing one. From 1 July 2026 the PAYE tax-free threshold rose from UGX 235,000 to UGX 335,000 a month, and a new 25% band was added between UGX 410,000 and UGX 485,000, so a payroll still running the old table is now wrong in both directions.
NSSF is unchanged at 15% of gross pay, 10% from the employer and 5% deducted from the employee, and since the NSSF (Amendment) Act 2022 every employer with at least one employee must be registered. PAYE and NSSF are both due by the 15th of the following month, and Local Service Tax by 31 October each year. We run this as a URA-registered tax agent, so the filing is part of the service rather than a separate step. The full band tables and more worked examples are in our PAYE guide, and the free PAYE calculator will check a single payslip in seconds.
The 2026 PAYE bands, and a payslip worked all the way through
These are the monthly bands for a resident employee, effective 1 July 2026, from URA’s own published rates.
- Up to UGX 335,000: nil. An employee at or below this pays no PAYE at all, where the old threshold was UGX 235,000.
- UGX 335,001 to 410,000: 20% of the amount above UGX 335,000.
- UGX 410,001 to 485,000: UGX 15,000 plus 25% of the amount above UGX 410,000. This band is the new one.
- UGX 485,001 to 10,000,000: UGX 33,750 plus 30% of the amount above UGX 485,000.
- Above UGX 10,000,000: the same again, plus a further 10% of the amount above UGX 10,000,000.
Worked at three salaries: UGX 500,000 gross gives PAYE of UGX 38,250, an effective rate of 7.65%. UGX 1,500,000 gives UGX 338,250, or 22.55%. UGX 5,000,000 gives UGX 1,388,250, or 27.77%, still below the surcharge threshold.
The order that trips employers up
Local Service Tax comes out of gross pay before PAYE is worked out, not after. Take an employee on UGX 420,000 gross in Kampala. LST for that pay band is UGX 30,000 a year, and an employer may take it in four monthly instalments of UGX 7,500 in the first four months of the financial year. In an LST month the chargeable pay is UGX 412,500, so PAYE is UGX 15,000 plus 25% of UGX 2,500, which is UGX 15,625. Work PAYE on the full UGX 420,000 instead and you withhold UGX 17,500, over-deducting UGX 1,875 a month from someone earning UGX 420,000. NSSF is 5% of gross, UGX 21,000 from the employee, and 10%, UGX 42,000, from the employer on top. So take-home in an LST month is UGX 375,875, and that employee costs the business UGX 462,000.
What one employee costs you, and takes home
Three salaries, Kampala, worked in an LST instalment month so the order above is visible. Local Service Tax is an annual amount taken in four monthly instalments, so in the other eight months PAYE is slightly higher and take-home slightly lower.
| Gross monthly pay | LST a year, taken in four instalments | PAYE that month | NSSF: 5% employee, 10% employer | Employee takes home | Costs the business |
|---|---|---|---|---|---|
| UGX 400,000 | UGX 20,000, so UGX 5,000 a month | UGX 12,000 | UGX 20,000 and UGX 40,000 | UGX 363,000 | UGX 440,000 |
| UGX 500,000 | UGX 30,000, so UGX 7,500 a month | UGX 36,000 | UGX 25,000 and UGX 50,000 | UGX 431,500 | UGX 550,000 |
| UGX 1,500,000 | UGX 100,000, so UGX 25,000 a month | UGX 330,750 | UGX 75,000 and UGX 150,000 | UGX 1,069,250 | UGX 1,650,000 |
The pattern holds at any salary: an employee costs the business their gross pay plus 10%, and the employer NSSF is a cost, not a deduction, so a UGX 1,500,000 salary is a UGX 1,650,000 line in your accounts. Budget from the right-hand column, not the left.
Two more rules worth knowing before you copy a spreadsheet from anywhere. Non-resident employees get no nil band at all: the first UGX 335,000 is taxed at a flat 10%, then UGX 33,500 plus 20% up to UGX 410,000, then UGX 48,500 plus 30% above that. And an employee with more than one employer must tell each which is the primary employer, after which the primary employer uses the normal bands and every other employer withholds at a flat rate. URA’s own live PAYE page gives that flat rate as 30% while 2026 press coverage citing URA gives 40%, so confirm the rate with URA for your own case rather than picking one.
What we do each month, and what you send us
You send us the month’s gross pay per employee, any changes (new hires, exits, salary changes, loans and advances), and confirmation of any benefit in kind. We calculate PAYE at the correct bands, NSSF at 15%, and Local Service Tax where it applies, then issue payslips and file the returns.
Benefits in kind are where hand-run Ugandan payrolls most often go wrong, because no cash changes hands so nothing gets recorded. The valuations are set out in the rules:
- A company vehicle available for private use: 20% multiplied by A, multiplied by B divided by C, less D. A is the vehicle’s market value when first provided, depreciated 35% a year on a reducing balance in later years; B is the number of days in the year it was used or available for private use; C is the number of days in the year; D is anything the employee pays for the benefit.
- Employer-provided housing: the lower of the market rent less what the employee pays for it, or 15% of the employee’s total employment income for the year including the housing benefit itself.
- A staff loan, or loans totalling, over UGX 1,000,000 at below the Bank of Uganda statutory discount rate: the benefit is the interest that would have been charged at the statutory rate less the interest actually paid, pro-rated for the months the loan ran.
- Not taxable, so stop adding them: any single benefit worth under UGX 10,000 in a month, meals in a staff canteen open to all employees without discrimination, reimbursed medical expenses and medical insurance premiums, employer contributions to a statutory retirement fund, and 25% of a gratuity paid to an employee with 10 or more years of service, the other 75% being taxable.
The classification that costs the most
Paying long-serving staff a fixed monthly fee and calling them consultants is the fastest way a payroll review turns into a large assessment, because the withholding obligation sits with the employer, not the worker. In Infectious Diseases Institute v Uganda Revenue Authority, Civil Appeal No. 006 of 2022, URA had assessed the institute roughly UGX 1,927,442,716 in principal tax and interest after a compliance audit, on the basis that anyone paid a fixed fee for more than two months was an employee. On 25 October 2024 the Commercial Division of the High Court held that this blanket two-month practice was wrong in law and that genuine consultants are not subject to PAYE. The useful lesson is that classification turns on the substance of the relationship, so if you engage consultants, keep the evidence of independence on file (own equipment, own hours, free to work for others, invoicing on their own terms), and if they are really staff, put them on the payroll before someone else decides for you.
Payroll deadlines: what is due, and when
| Payroll task | Deadline | Who does it |
|---|---|---|
| Calculate PAYE at current bands, after LST | Each payroll run | Employer, or us on your behalf |
| File and remit PAYE to URA | 15th of the following month | Employer, filed through URA e-Tax |
| Remit NSSF (10% employer, 5% employee) | 15th of the following month | Employer, registered with NSSF |
| Deduct and remit Local Service Tax | By 31 October each year | Employer, to the local authority where each employee lives |
| Issue payslips | Each payroll run | Employer, or us on your behalf |
Miss the PAYE deadline and the penalty widely reported is the higher of UGX 200,000 or 2% of the unpaid tax per month, plus 2% a month interest, with an extension of up to 90 days available on application that does not move the payment date itself. We could not match those figures to a URA publication, so treat them as indicative and confirm the current PAYE penalty with URA. The Local Service Tax penalty is on firmer ground: 50% of the tax due, which is a heavy hit on what is usually the smallest line on the payroll.
Set this up first, before a payroll service is what you need
Payroll only becomes a real cost once there is a first employee. This is the order, with what each step costs, and we are named only where we genuinely earn the money.
- Register, and know the real fee. A URSB business name is UGX 90,000 in total: UGX 35,000 to reserve the name and UGX 55,000 to register it. A private company whose nominal share capital is UGX 5,000,000 or less costs UGX 105,000 to register, on top of the same UGX 35,000 name reservation, plus 0.5% stamp duty on the capital, so UGX 25,000 on UGX 5,000,000 of capital. A TIN is free from URA and takes about five minutes online if you hold a National ID. A KCCA or local council trading licence is not free: a Grade IV kiosk is UGX 6,000 a year, a Grade IV general shop UGX 31,500, a Grade I boutique or salon UGX 210,000, a Grade I printing and publishing firm UGX 412,500. URSB and KCCA schedules, checked September 2026. Owners commonly report paying agents anywhere from about UGX 600,000 to several million shillings for the same registration errand, so ask for the official fee in writing first.
- The free habits, from day one. Keep business money in its own account and its own mobile money line, write down every sale and expense the day it happens, put the catalogue on WhatsApp Business, and claim your Google Business Profile so the place shows on Maps. Claiming it costs nothing and most owners still pay someone to do it: how to add a business to Google Maps.
- Once there is stock to lose or staff at the till: Growth Informer Business for sales, stock and the daily cash-up, with EFRIS switched on when URA requires it and left off until then.
- Once customers look you up before they visit: a website , see how to create a business website in Uganda, with a monthly care plan at if you want it kept running.
- At the first employee: register with NSSF, which is compulsory from one employee, work out the LST band, and get the first payslip right. This is the point at which a payroll service starts earning its keep, not before.
- When no ready-made tool fits the workflow: a custom HR and payroll build, , quoted per project.
- When a PAYE penalty, an NSSF query or an assessment is already live: that is where a URA-registered tax agent earns the fee, and it is the section below.
Be honest about where you are. A one-person business with no staff does not need payroll services at all; it needs the daily record and, once turnover passes UGX 10,000,000 a year, presumptive tax filed correctly. Check any single salary yourself first with the free PAYE calculator, and see accounting services for the monthly books payroll sits inside.
If a PAYE penalty or NSSF query has already landed
If URA has flagged a PAYE shortfall or NSSF has queried your remittances, the amount grows every month it is unresolved, so the order of work matters. Do these before you call anyone.
- Confirm the exact scope: which months, which tax, and which employees the query covers. Answer that and nothing wider.
- Recalculate at the bands that applied at the time. The resident table changed on 1 July 2026, so a spreadsheet built before that date is correct for June 2026 and earlier and wrong for July onwards. A large share of 2026 PAYE queries are simply this.
- Gather the evidence for those months: payslips, the PAYE returns as filed, the NSSF remittance schedules, bank or mobile money proof of the payments, and the employment contracts for anyone whose status could be questioned.
- If it becomes an assessment you disagree with, object within 45 days of the date of the notice, in writing, stating your grounds and attaching the evidence. The burden of proof is on you, the Commissioner must serve a decision within 90 days, and from that decision you have 30 days to apply to the Tax Appeals Tribunal. How a URA tax dispute works has the full timetable.
This is our reading of the published rules, not tax advice; for a ruling on your own case go to URA or a registered tax adviser.
Where we come in: we are registered with URA as a tax agent, so we can rebuild the affected payroll months, file the corrected returns, draft and lodge an objection, and represent you through it. We quote after seeing the notice and the payroll, never before. Send them on WhatsApp to +256 702 946 946.
How Growth Informer Software Services can help
We run payroll as a URA-registered tax agent: PAYE at the current bands and in the right order, NSSF, Local Service Tax, payslips and the filings, on the deadlines in the table above. We quote after seeing your headcount and pay structure, at a fixed price agreed before work starts, and we publish no price for payroll or tax work because no two staff lists are the same.
If you would rather run payroll inside your own system than hand it over, that is a different conversation and sometimes the cheaper one. Where a standard tool does not fit the way you pay people, we build one, , with the source code and data staying yours.
Message us on WhatsApp at +256 702 946 946 with your staff list and gross pay, or the notice if URA or NSSF has already been in touch. We reply within 6 hours and set up a meeting for the next day.
Frequently asked questions
What does a payroll outsourcing service in Uganda actually do?
Calculates PAYE at the current bands, deducts and remits NSSF and Local Service Tax, issues payslips, and files everything with URA and NSSF by the monthly deadlines, so an employer does not have to track the dates or the band changes.
How has PAYE changed in 2026?
From 1 July 2026 the tax-free threshold rose from UGX 235,000 to UGX 335,000 a month, and a new 25% band was added between UGX 410,000 and UGX 485,000. Someone on UGX 500,000 gross now pays UGX 38,250, an effective rate of 7.65%; someone on UGX 1,500,000 pays UGX 338,250, or 22.55%.
Is Local Service Tax deducted before or after PAYE?
Before. Local Service Tax comes out of gross pay first, and PAYE is then worked out on what is left. On UGX 420,000 gross with LST of UGX 30,000 a year taken in four instalments of UGX 7,500, PAYE in an LST month is UGX 15,625 rather than the UGX 17,500 you get by ignoring the order.
What is NSSF filing?
Remitting the 15% total NSSF contribution, 10% from the employer and 5% deducted from the employee, by the 15th of the month following the payroll month. Every employer with one or more employees must be registered with NSSF.
What does a PAYE filing service cost in Uganda?
It depends on headcount and pay structure, so we quote after seeing your payroll, at a fixed price agreed before work starts. There is no fee for the filing itself, since PAYE returns are filed free through URA's e-Tax portal; what you pay for is the calculation being right and the deadline being kept.
Can I pay staff as consultants instead of putting them on payroll?
Only where they are genuinely independent, and the employer carries the risk if they are not. In Infectious Diseases Institute v Uganda Revenue Authority the High Court held in October 2024 that URA's blanket rule of treating anyone paid a fixed fee for over two months as an employee was wrong in law, but the assessment at stake was about UGX 1.9 billion. Classification turns on the substance of the relationship, so document it.