With the New 2025 Per Diem Rules, businesses finally have a framework that reflects today’s economic reality, and employees can now travel without unnecessary financial strain.

A Clear Breakdown of the New 2025 Per Diem Rules

Under the Finance Act 2025, the government has raised the tax-free per diem limit to KES 10,000 per day. This adjustment brings much-needed clarity and fairness to how work travel is handled.

Here’s what the New 2025 Per Diem Rules introduce:

1. KES 10,000 Per Day Is Now Tax-Free

The first KES 10,000 paid as per diem is now completely exempt from tax. Under the New 2025 Per Diem Rules, this amount is considered a reimbursable business expense as long as it relates to official duties performed away from the usual workstation.

2. Any Amount Above KES 10,000 Is Taxable

If an employee receives more than the KES 10,000 limit, only the extra portion becomes taxable.

Example:
Per diem paid: KES 13,500

• KES 10,000 → tax-free
• KES 3,500 → taxable under PAYE

This simple approach makes it easier for payroll teams to comply with tax requirements.

3. Board Sitting Allowances Don’t Change

The New 2025 Per Diem Rules do not affect the taxation of board sitting allowances. Those continue to follow their own guidelines.

Why the New 2025 Per Diem Rules Matter

These updates are more than just administrative changes—they bring real benefits.

For Employees

• Travel costs no longer come out of pocket.
• Allowances now match real travel expenses.
• Work trips become more comfortable and predictable.

For Employers

• Policies and payroll processing become clearer and easier.
• Less time is spent on petty cash reimbursements.
• HR teams can align travel guidelines with actual market rates.

The New 2025 Per Diem Rules help modernize how organizations handle business travel and improve overall compliance.

How Employers Should Adjust to the New 2025 Per Diem Rules

To stay compliant and avoid PAYE mistakes, employers should take a few immediate steps:

1. Update the Travel and Allowance Policy

The policy should clearly outline:

• Eligibility
• Approvals
• Daily per diem amounts
• Required documentation

2. Modify Payroll Systems

Ensure payroll distinguishes between:

• Tax-free per diem (up to KES 10,000)
• Taxable amounts above the limit

3. Strengthen Record-Keeping

Under the New 2025 Per Diem Rules, proper documentation is essential. Maintain:

• Travel approvals
• Purpose of travel
• Destination and duration
• Disbursement records

Final Thoughts

The New 2025 Per Diem Rules mark a much-needed shift in Kenya’s travel reimbursement framework. Raising the tax-free limit to KES 10,000 finally brings the system in line with real travel costs and makes business travel more manageable for both employees and employers.