Uganda's FY2026/27 tax changes: what small businesses should know
The 2026 tax amendment Acts took effect on 1 July: a higher PAYE threshold, a UGX 300 million VAT threshold, new excise rates and lower EFRIS penalties.
The tax amendment Acts for the 2026/27 financial year took effect on 1 July 2026, after assent on 18 May. The Daily Monitor reported that the package is meant to support domestic revenue of 45.96 trillion shillings, of which 40.16 trillion shillings is tax. Most of the coverage has been about households. This is a digest of the measures that change what a small business does from this quarter.
PAYE: a higher tax-free threshold
The monthly tax-free threshold for employees rose from UGX 235,000 to UGX 335,000. On an annual basis the EY alert sets the bands at nil up to UGX 4.02 million, 20 percent between UGX 4.02 million and 4.92 million, UGX 180,000 plus 25 percent between UGX 4.92 million and 5.82 million, and UGX 405,000 plus 30 percent above UGX 5.82 million, with the additional 10 percent on income above UGX 120 million a year retained. Every payroll run from July 2026 should already reflect this; if yours was configured years ago and never revisited, check the September payslips.
VAT: the registration threshold doubles
The VAT registration threshold moved from UGX 150 million to UGX 300 million of annual turnover. The Economic Policy Research Centre notes that businesses now under the threshold are no longer required to register or file returns, which cuts compliance cost for formal SMEs. Two cautions. First, deregistration is a decision, not an automatic event; talk to URA or your accountant before you stop filing. Second, if your customers are VAT-registered businesses, they may still prefer a fiscalised VAT invoice, so voluntary registration can be commercially sensible.
EFRIS and tax stamp penalties come down
The Tax Procedures Code amendments reset several penalties. According to the EY summary, the penalty for not using an electronic fiscal device falls from the tax due or UGX 8 million to double the tax due or UGX 200,000, whichever is higher, and the penalty for failing to issue an e-invoice falls from UGX 6 million to the same double-tax-or-UGX 200,000 formula. The minimum tax stamp penalty drops from UGX 50 million to UGX 2 million or double the tax due. The obligation to fiscalise has not changed; the cost of a first mistake has.
Excise: higher costs on everyday stock
The excise changes land directly on shelf prices. Cooking oil goes from UGX 200 to UGX 400 per litre, sugar from UGX 100 to UGX 200 per kilogram, cement from UGX 500 to UGX 750 per 50 kilogram bag, and petrol and diesel each rise by UGX 200 per litre. Imported spirits under 80 percent alcohol move from UGX 1,700 to UGX 3,500 per litre or 80 percent, whichever is higher. Motorcycles at first registration now carry UGX 500,000 of excise, up from UGX 200,000, plus a new UGX 30,000 stamp duty. For a shop, re-cost every affected line; for a delivery business, the fuel increase goes into your rates.
New withholding taxes to watch
Three new withholding obligations are relevant to specific trades. Commissions paid for telecom and mobile money retail services attract 10 percent withholding, final for resident individuals. Payments to public entertainers attract 6 percent. And software is now expressly a royalty, so payments to non-resident vendors for licences and subscriptions attract withholding tax. If you host events, run a mobile money agency or pay for foreign software, these affect your cash flow and your returns.
Arrears relief
The amendments also waive all tax, penalties and interest outstanding as at 30 June 2016, and provide a waiver of interest and penalties on older debts where the principal is paid within a set window. If you have an old balance on your URA ledger, the window is the moment to clear it; ask URA for the exact terms that apply to your account.
What to do this month
- Confirm your payroll uses the UGX 335,000 threshold and the new bands.
- Check annual turnover against the UGX 300 million VAT threshold and decide, with advice, whether anything changes.
- Re-cost excise-affected stock and update shelf prices.
- List any payments to entertainers, agents or foreign software vendors and set up the withholding.
- Pull your URA ledger and settle old principal while the waiver applies.
Sources
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