How PAYE is calculated in Uganda, step by step
A worked example in UGX: gross pay, Local Service Tax, the URA monthly bands and NSSF - and what the employee takes home.
PAYE (Pay As You Earn) is the income tax employers in Uganda withhold from salaries every month and remit to the Uganda Revenue Authority (URA). Getting it right matters: an under-deduction becomes the employer's liability, and employees notice an over-deduction on payday.
The four steps
- Start with gross pay. Basic salary plus taxable allowances and overtime.
- Take off Local Service Tax. LST is deductible for PAYE, so in a month when LST is collected the instalment comes off before tax, together with any non-taxable allowances. What is left is the chargeable income.
- Apply the monthly bands to the chargeable income, band by band.
- Deduct NSSF separately. The employee contributes 5% of gross pay and the employer adds 10%. The employee's NSSF is not deductible for PAYE.
The bands AjiraWorks applies
The Uganda payroll template in use from July 2026 applies these monthly bands: 0% up to UGX 335,000; 20% on UGX 335,001 to 410,000; 25% on UGX 410,001 to 485,000; 30% above UGX 485,000; and 40% on the part of monthly income above UGX 10,000,000. The bands are an editable table, so when URA announces a change it is a data update, not a software release.
Local Service Tax
LST is a local government tax on employees, set by income band and capped at UGX 100,000 a year. By default it is collected in four monthly instalments from July to October (up to UGX 25,000 a month); a company can instead deduct the full annual amount once, in a month it chooses.
A worked example
An employee earns a gross UGX 1,500,000 in September, with no non-taxable allowances.
- LST for September (gross above UGX 1,000,000): UGX 25,000
- Chargeable income: 1,500,000 - 25,000 = UGX 1,475,000
- PAYE: 20% of 75,000 (15,000) + 25% of 75,000 (18,750) + 30% of 990,000 (297,000) = UGX 330,750
- NSSF: employee 5% = UGX 75,000; employer 10% = UGX 150,000
- Net pay: 1,500,000 - 25,000 - 330,750 - 75,000 = UGX 1,069,250
Rates change, so always confirm the current bands with URA. AjiraWorks shows the calculation behind every payslip line, so you can check each figure before you approve payroll.
