URA Announces New PAYE Rates, Orders Employers To Correct July And August Tax Returns

The Uganda Revenue Authority (URA) has announced changes to the Pay As You Earn (PAYE) return following amendments to the Income Tax law, with employers required to ensure that employees are taxed using the new rates that took effect on July 1, 2026.The changes follow the Income Tax (Amendment) Act, 2026, which introduced an updated income tax structure for resident individuals.

URA has now updated the PAYE return to reflect the new rates and is calling on employers to correct any returns that were submitted using the previous tax rates.Under the new structure, employees earning up to UGX 335,000 per month in chargeable income will not pay PAYE. Those earning between UGX 335,001 and UGX 410,000 will be taxed at 20 percent on the amount above UGX 335,000, while those earning between UGX 410,001 and UGX 485,000 will pay UGX 15,000 plus 25 percent on the amount above UGX 410,000.For employees earning between UGX 485,001 and UGX 10 million, the applicable tax is UGX 33,750 plus 30 percent of the amount above UGX 485,000. Those earning more than UGX 10 million will pay the same amount, together with an additional 10 percent on the portion of their chargeable income above UGX 10 million.URA has specifically advised employers who declared PAYE returns for July or August 2026 before the new rates were updated in the system to amend the affected returns.

Employers are required to download a fresh PAYE return template from the URA portal and use it to make the necessary corrections.The tax authority explained that any credit arising from the amendment will remain available to the employer and can be used when filing the subsequent PAYE return. This means employers who may have paid more tax than required under the old rates will be able to carry forward the resulting credit.URA has also reminded employers that overpaid tax belongs to the affected employees and must be refunded to them.

The refund may be made through an adjustment to the employees’ subsequent payroll, ensuring that workers recover amounts that were deducted above the tax required under the new law.To demonstrate the impact, URA gave an example of an employee earning UGX 500,000 in July 2026. Under the old rates, the employee would have had UGX 52,000 deducted in PAYE, while the correct tax under the new rates is UGX 38,250, resulting in an overpayment of UGX 13,750. The notice was first published on September 7, 2026, with URA urging employers to comply with the revised tax requirements.