Overview:
While broader tax reforms spark debate, low-earners and small businesses stand to benefit from key relief measures in the 2026-27 budget.
KAMPALA, Uganda — Proposed tax amendments for the 2026-27 financial year will deliver financial relief to small businesses and lower-income workers, even as the government seeks to raise an additional 4.8 trillion shillings through broader revenue mobilization measures.
The dual adjustments to the Pay As You Earn and Value Added Tax frameworks have been welcomed by tax experts and advocates as progressive steps toward easing the financial burden on vulnerable economic players.
Higher PAYE Threshold Boosts Disposable Income
Among the most well-received measures is the decision to raise the PAYE tax-free threshold from 235,000 shillings to 355,000 shillings. The adjustment means low-income workers will retain more of their monthly earnings, providing direct relief and boosting disposable income amid rising living costs.
Easing Compliance Costs for Small Enterprises
Simultaneously, the government will raise the VAT registration threshold from 150 million shillings to 250 million shillings, effective July 1, 2026. The reform is designed to reduce administrative and compliance costs for small enterprises.
Juliet Najjinda Mutabaazi, associate director for tax services at PwC, noted that the adjustment acknowledges that many VAT-registered small businesses contribute negligibly to overall tax collections while bearing heavy compliance burdens. Under the new threshold, businesses with an annual turnover below 250 million shillings can opt to deregister from VAT, eliminating monthly filing requirements.
Mutabaazi clarified, however, that deregistration does not exempt these enterprises from issuing electronic receipts through the Electronic Fiscal Receipting and Invoicing System. Furthermore, some eligible businesses may choose to remain registered voluntarily to continue claiming input VAT on investments and purchases.
Debate Over Broader Economic Inclusion
Despite these positive adjustments, a recent report by the Forum for Women in Democracy, titled Shaping an Equal Future, warns that other elements of the revenue strategy could offset these gains for certain groups.
Advocates point out that the government’s heavy reliance on indirect taxation, such as proposed fuel levies, threatens to disproportionately impact women in the informal sector who depend on small-scale trading and public transportation. Higher fuel costs are expected to increase transport expenses for market vendors and caregivers.
The tax debate has also renewed calls for more gender-responsive budgeting. Livingstone Ssewanyana, executive director of the Foundation for Human Rights Initiative, argued that the ultimate success of any tax and budget reform must be evaluated by the quality and accessibility of public services, noting that gaps in delivery often undermine the intended benefits of budget allocations.