Uganda's new PAYE bands: what to fix on your October payroll
URA has rebuilt the PAYE return around the UGX 335,000 threshold. What the new bands are, who must amend July and August returns, and how to refund staff.
If you employ anyone in Uganda, the October payroll is the one to get right. On 7 September 2026 the Uganda Revenue Authority published a public notice confirming that the PAYE return template on its portal now carries the resident tax rates introduced by the Income Tax (Amendment) Act 2026, effective from 1 July 2026. Employers who filed July or August returns on the old rates are expected to amend them. Here is what changed, who is affected and the practical steps.
What Parliament changed
Parliament passed the Income Tax (Amendment) Bill 2026 on 23 April 2026. The headline for employers was the monthly PAYE tax-free threshold for employees, which rose from UGX 235,000 to UGX 335,000. The debate that day also removed a proposed minimum tax on loss-making firms and extended certain exemptions, but for payroll the threshold is the change that matters.
The new monthly bands for resident employees
URA's PAYE rates page now reads as follows for resident individuals, per month of chargeable income:
| 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 |
Two things stand out. First, the 10% band that used to sit between UGX 235,000 and UGX 335,000 has gone; the first taxable shilling is now taxed at 20%. Second, there is a new 25% band between UGX 410,001 and UGX 485,000 before the familiar 30% rate begins. Non-resident employees are still taxed from the first shilling, with 10% on income up to UGX 335,000.
URA's worked example makes the effect concrete. An employee earning UGX 500,000 in July 2026 would have paid UGX 52,000 under the old table and UGX 38,250 under the new one, an overpayment of UGX 13,750 if the employer used the old rates.
Who has to amend returns
The notice is explicit: employers who already filed July or August 2026 PAYE returns using the old rates should amend those returns. To do so you download a fresh PAYE return template from the URA portal, since the old template still carries the old formula. The credit that results stays with the employer and can be applied against the next PAYE return, so there is no refund claim to chase.
The employee side is the part many businesses forget. URA says the overpaid tax must be passed back to the affected staff, and that this "may be through adjustment to the subsequent payroll". In plain terms, work out the difference for each employee for July and August and add it to their October net pay, with a line on the payslip that explains it.
Deadlines have not moved
The amendment changed rates, not timing. Monthly returns, including PAYE, are still due on the 15th day of the month following the return period, and the payment is due on the same date. The late filing penalty remains UGX 200,000 or 2% of the tax liability for the period, whichever is higher. An extension to file, if granted, cannot exceed 90 days in total and does not move the payment date.
A checklist for the October run
- Update the PAYE table in whatever you use to run payroll, and test it on a UGX 500,000 salary: the answer should be UGX 38,250.
- Recalculate July and August for every employee and list the difference per person.
- Amend the July and August returns on the URA portal with the new template, and carry the credit forward.
- Pay the differences back to staff in the next payroll and show the adjustment on the payslip.
- Keep the workings. A labour officer or a URA auditor may ask how the refund was computed.
Why this matters beyond compliance
For a worker on UGX 400,000 a month, the change means PAYE falls from UGX 23,000 to UGX 13,000, which is money that lands in a household budget immediately. Employers who return the July and August overpayment promptly earn goodwill at no cost, because the credit comes back to them from URA on the next return anyway. The only loser is the business that leaves the old table in place and keeps over-deducting, which is both unlawful and, with the new template now live, easy for URA to spot.
Sources
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