The Uganda Revenue Authority (URA) has directed employers across the country to review their Pay As You Earn (PAYE) declarations and refund workers who may have been overtaxed following changes introduced under the Income Tax (Amendment) Act, 2026.The new PAYE rates became effective on July 1, 2026, and have now been incorporated into the PAYE return. URA said the changes are intended to ensure that the tax deducted from employees’ salaries reflects the rates provided for under the amended income tax law.
Under the revised structure, resident individuals earning a monthly chargeable income of up to UGX 335,000 will pay no PAYE. Those earning between UGX 335,001 and UGX 410,000 will pay 20 percent on the amount above UGX 335,000, while incomes between UGX 410,001 and UGX 485,000 will attract UGX 15,000 plus 25 percent on the amount above UGX 410,000.For monthly chargeable income between UGX 485,001 and UGX 10 million, the tax is UGX 33,750 plus 30 percent of the amount above UGX 485,000. Employees earning more than UGX 10 million will also pay an additional 10 percent on the portion of their chargeable income above UGX 10 million.URA said employers who had already filed their July or August 2026 PAYE returns before the new rates were updated must amend the affected returns.
The employers are required to download a new PAYE return template from the URA portal and use it to submit the corrected information.The authority has further explained that where an amendment results in a tax credit, the credit will be made available to the employer for use in a subsequent PAYE return. Employers therefore do not lose the amount resulting from an overpayment made under the previous tax rates.However, URA stressed that employers have a responsibility to ensure that employees receive any tax that was overpaid. The money can be refunded directly or handled through an adjustment in the employees’ subsequent payroll, allowing affected workers to recover the excess deductions.
URA illustrated the change using an employee whose July salary was UGX 500,000. Under the old rates, UGX 52,000 would have been deducted as PAYE, but the correct tax under the new rates is UGX 38,250. This means the employee would have been overtaxed by UGX 13,750, highlighting the importance of employers reviewing their earlier returns.The new notice, first published on September 7, 2026, is therefore a reminder to employers to immediately check their July and August PAYE declarations and make corrections where necessary. URA has urged taxpayers requiring further clarification to contact its toll-free lines on 0800-117000 or 0800-217000, or access information through its official channels.
