New PAYE bands from July 2026: amend your payroll returns

Employers in Uganda have a correction to make this quarter. The Income Tax (Amendment) Act, 2026 raised the monthly tax-free threshold for resident employees and reshaped the bands above it, but the Act was assented to late, after most businesses had already run July and August payroll on the old rates. URA has now confirmed that the law applies from 1 July 2026 and has told employers to amend the affected returns. Here is what changed and what to do.

The old bands and the new

Until June 2026 the first UGX 235,000 of monthly chargeable income was tax free for a resident employee, as URA's domestic taxes FAQs still describe. The new schedule, published by URA on 7 September 2026 in its notice on changes to the PAYE return form, reads as follows for resident individuals:

Monthly chargeable income (UGX)	Tax
0 to 335,000	Nil
335,001 to 410,000	20% of the amount above 335,000
410,001 to 485,000	15,000 plus 25% of the amount above 410,000
485,001 to 10,000,000	33,750 plus 30% of the amount above 485,000
Above 10,000,000	33,750 plus 30% of the amount above 485,000, plus 10% of the amount above 10,000,000

EY's summary of the Act describes the same change as an increase in the tax-free threshold from UGX 235,000 to UGX 335,000 a month. The non-resident rates are not part of this notice.

How much a typical salary overpaid

URA's own worked example uses a July 2026 salary of UGX 500,000. Under the old formula the tax was 25,000 plus 30% of (500,000 less 410,000), which is UGX 52,000. Under the new formula it is 33,750 plus 30% of (500,000 less 485,000), which is UGX 38,250. The employee overpaid UGX 13,750 in that month alone, and again in August if the same rates were used.

Multiply that across a team of ten and you have a few hundred thousand shillings that belong to your staff, sitting with URA as a credit.

Why the correction is backdated

URA's notice of 23 September 2026 states that the Income Tax (Amendment) Act, 2026 and the Excise Duty (Amendment) Act, 2026 were assented to with a commencement date of 1 July 2026. It asks taxpayers to take note of the effective date, review their returns and declarations, and make the necessary adjustments for July 2026, August 2026 and onward. The notice lists the PAYE return among those affected, alongside withholding tax, VAT, excise and gaming returns.

What URA asks employers to do

The September 7 notice sets out four steps:

1. Where the PAYE return for July 2026 or August 2026 was declared before the update, amend the affected returns to declare the correct tax.
2. Download a new PAYE return template from the URA portal to make the amendment.
3. Any credit arising from the amendment is available to the employer to use in a subsequent PAYE return.
4. Employers are obliged to refund the overpaid tax to the affected employees, which may be done through an adjustment to the next payroll.

The last point matters. The credit is URA's way of settling with you; the refund is your way of settling with your staff. Both have to happen.

Deadlines have not moved

The ordinary PAYE rhythm continues: URA's FAQs state that the employer must remit the total tax by the 15th day of the following month. September 2026 payroll, the first month most employers will run on the new bands, is due by 15 October. Amendments for July and August should go in before or alongside it so that the credit is in place when you need it.

A checklist for October

• Re-run July and August payroll on the new bands and note the PAYE difference per employee.
• Amend both returns on the URA portal using the new template.
• Refund each employee the overpaid amount in the September or October payroll and show it on the payslip.
• Confirm that your September return is already on the new schedule.
• Keep the before and after calculations with your payroll records.

A higher threshold is good news for lower-paid staff, who will see a little more in hand each month. The administrative work falls on the employer, and it is worth getting it done in one sitting rather than carrying a reconciliation into the new year.

Sources

1. https://ura.go.ug/en/changes-to-paye-return-form-following-the-income-tax-amendment-act-2026/
2. https://ura.go.ug/en/effective-date-of-the-income-tax-amendment-act-2026-and-the-excise-duty-amendment-act-2026/
3. https://www.ey.com/en_gl/technical/tax-alerts/uganda-issues-tax-amendment-acts-for-2026
4. https://ura.go.ug/en/dt-faqs/