The 2026 PAYE Tax Reforms and Financial Resilience of Individual Taxpayers in Uganda
DOI:
https://doi.org/10.53819/81018102t4432Abstract
This study examined the potential implications of Uganda's 2026 Pay As You Earn (PAYE) tax reforms for the financial resilience of individual taxpayers. The study responded to a limitation in the existing tax-policy literatures, which has predominantly evaluated personal income tax reforms through domestic revenue mobilisation, taxpayer compliance, taxable-income responses and redistribution, while giving comparatively limited attention to the financial capacity of individual taxpayers to absorb and recover from economic shocks. The study adopted a policy-oriented conceptual and evidence-synthesis approach. It integrated Uganda-specific evidence on personal income taxation with recent international literatures on financial resilience, financial literacy, saving, debt management and household risk management. The analysis developed a conceptual pathway linking PAYE reform to tax liability, disposable income and financial resilience. The 2026 reform raises Uganda's resident PAYE tax-free threshold from UGX 235,000 to UGX 335,000 per month and restructures the intermediate tax bands while retaining the additional 10% surcharge on monthly chargeable income above UGX 10 million. The immediate effect was therefore heterogeneous across taxpayers rather than uniformly expansionary or contractionary. Previous Ugandan evidence indicated that personal income tax reforms increased revenue while producing distributional and behavioural effects across taxpayer groups. Recent financial-resilience research further indicated that disposable resources, precautionary savings, debt management, financial literacy, insurance and risk-management capacity are important components of resilience. In view of the findings, the study recommends that the welfare implications of PAYE reform assessed beyond statutory tax rates and aggregate revenue.
Keywords: PAYE, personal income tax, tax reform, disposable income, financial resilience, financial wellbeing, Uganda, taxpayers, tax policy
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