If you run your own business, work as a freelancer, or operate as a sole trader, the responsibility for your tax compliance rests entirely with you. There is no employer to deduct PAYE on your behalf, no P9 form waiting in HR — only the Kenya Revenue Authority expecting your annual return by 30th June 2026.
Self-employed individuals and freelancers across Kenya — including traders, consultants, contractors, agribusiness operators, and sole proprietors in Meru, Nkubu, Isiolo and Tharaka Nithi — are among the most likely to either miss the deadline or file incorrectly. This guide explains everything you need to know.
Who Counts as Self-Employed for KRA Purposes?
For KRA purposes, you are self-employed if you earn income outside a formal employment relationship. This includes:
- Sole traders and small business owners — including retail shops, salons, hardware stores, and food businesses
- Freelancers and consultants — graphic designers, IT professionals, writers, accountants, engineers, and others who invoice clients directly
- Contractors — individuals engaged on a project or contract basis without a permanent employer
- Agribusiness operators — farmers, horticulturalists, and food processors selling produce commercially
- Professionals in private practice — doctors, lawyers, architects, and surveyors running their own practices
- Directors who draw income from a company they own — even where PAYE has been paid on salary, additional director fees or dividends may require separate treatment
If you receive income and no employer has deducted tax on it, you are self-employed for the purposes of the annual return.
What Tax Obligations Apply to Self-Employed Individuals?
Self-employed individuals in Kenya are subject to tax under the Income Tax Act (Cap 470). The key obligations are:
1. Annual Income Tax Return
You must file an annual income tax return on KRA iTax by 30th June each year, declaring all business income earned in the previous year. This is filed using the self-employment or business income sections of the individual returns form.
2. Instalment Tax
If your tax liability for the year is expected to exceed Ksh 40,000, you are required to pay instalment tax in four equal payments during the year — in April, June, September and December. Instalment tax is calculated based on the previous year’s tax liability or an estimate of the current year’s liability. See the Tax Procedures Act 2015 for the full framework.
3. VAT Registration (if applicable)
If your annual taxable turnover exceeds Ksh 5 million, you are required to register for VAT under the Value Added Tax Act (Cap 476) and file monthly VAT returns. Below this threshold, VAT registration is voluntary but can be advantageous in some sectors.
4. Withholding Tax
If your clients are companies or government entities, they may be required to deduct withholding tax at source from your invoices — typically at 5% for professional services. This withholding tax is credited against your annual tax liability when you file your return.
What Records Do You Need to Keep?
Good record keeping makes filing your annual return straightforward and protects you in the event of a KRA audit. You should maintain:
- Sales and income records — invoices issued, receipts, bank deposits, and mobile money records for all income received
- Expense receipts — rent, stock purchases, salaries paid, fuel, equipment, and any other legitimate business costs
- Bank statements — covering the full tax year, January to December 2025
- Withholding tax certificates — issued by clients who deducted WHT from your invoices
- Asset records — if you purchased equipment or vehicles used in the business
- Previous year’s tax return — useful for reference and for instalment tax calculations
KRA can request records going back up to five years during an audit. Keeping organised annual records protects your business.
How to Calculate Your Taxable Business Income
Your taxable business income is your gross income minus allowable business deductions. The basic formula is:
| Step | Calculation |
| Start with | Total gross income received (all sales, fees, invoices paid) |
| Subtract | Cost of goods sold (stock purchased to generate sales) |
| Subtract | Allowable business expenses (rent, salaries, fuel, professional fees, insurance, repairs) |
| Subtract | Capital allowances (depreciation on assets used in the business) |
| Result | Taxable business profit |
The resulting taxable profit is then taxed at the individual income tax rates — the same bands that apply to salaried employees. Every individual is entitled to the annual personal relief of Ksh 28,800.
What Counts as an Allowable Business Expense?
Expenses are allowable if they are incurred wholly and exclusively for the purpose of generating business income. Common allowable expenses include:
- Rent for business premises
- Employee salaries and casual labour wages
- Stock purchases and raw materials
- Business-related fuel and transport
- Professional and legal fees
- Business insurance premiums
- Advertising and marketing costs
- Repairs and maintenance of business assets
Personal expenses, fines, and capital expenditure (such as buying land or a building) are generally not allowable. If you are unsure whether a specific expense qualifies, a CPA can advise you.
Step-by-Step: How Self-Employed Individuals File KRA Returns on iTax
Step 1: Log In to KRA iTax
Go to itax.kra.go.ke and log in with your KRA PIN and password.
Step 2: Select the Return Type
Navigate to Returns, then File Return. Select Income Tax, then Resident Individual. Select the return period: January 2025 to December 2025.
Step 3: Download the Returns Excel Form
Click Download to get the Excel returns form to your computer. Open it in Microsoft Excel and enable macros when prompted. Do not use Google Sheets.
Step 4: Complete the Business Income Tab
Open the Business Income section of the Excel form and enter:
- Gross turnover: total income received from all business activities in 2025
- Cost of sales: direct costs of generating that income
- Business expenses: all allowable costs as listed above
- Capital allowances: if you purchased equipment or vehicles
- Withholding tax credits: amounts deducted by clients at source
The form calculates your taxable profit and resulting tax liability automatically based on the figures you enter.
Step 5: Validate, Generate and Upload
Click Validate to check for errors, then Generate to create the .zip file. Return to the iTax portal, go to Returns, then File Return, upload the .zip file, and click Submit. Download the Acknowledgement Receipt as proof of filing.
Step 6: Pay Any Tax Due
If the form shows tax payable, generate a payment slip (E-Slip) under Payments, then Payment Registration. Pay via M-Pesa Paybill 572572 (account number is your KRA PIN), bank transfer, or online banking.
Self-employed in Meru County?
Mutea and Associates CPA in Nkubu prepares and files KRA returns for self-employed individuals, freelancers, and sole traders across Meru, Isiolo, Tharaka Nithi, Embu and Kirinyaga. We ensure your expenses are correctly claimed and your return is accurate. Book your returns appointment today.
Worked Example: A Meru-Based Sole Trader
Consider a hardware shop owner in Nkubu, Meru County, operating as a sole trader in 2025:
| Item | Amount (Ksh) |
| Total sales (gross income) | 1,800,000 |
| Less: cost of goods sold | (1,100,000) |
| Less: rent for business premises | (120,000) |
| Less: employee wages (one assistant) | (180,000) |
| Less: fuel and transport | (48,000) |
| Less: insurance and other costs | (32,000) |
| Taxable business profit | 320,000 |
| Tax on Ksh 320,000 (at applicable bands) | Approx. Ksh 72,000 |
| Less: personal relief | (28,800) |
| Net tax payable | Approx. Ksh 43,200 |
This example illustrates why accurate record keeping matters — the difference between a well-documented expense list and a poorly documented one can significantly affect the tax liability.
| Self-employed in Meru County? Mutea and Associates CPA in Nkubu prepares and files KRA returns for self-employed individuals, freelancers, and sole traders across Meru, Isiolo, Tharaka Nithi, Embu and Kirinyaga. We ensure your expenses are correctly claimed and your return is accurate. Book your returns appointment today. |
Common Mistakes Self-Employed Individuals Make
- Understating income: omitting cash sales or mobile money receipts that are not reflected in bank statements
- Overclaiming personal expenses: deducting personal phone bills, home rent, or private fuel as business expenses
- Missing withholding tax credits: not offsetting WHT deducted by clients against the annual tax liability
- Not keeping records: estimating income and expenses from memory rather than documented records
- Ignoring instalment tax: failing to pay instalments during the year and then facing a large end-of-year bill plus late payment interest
- Filing on the wrong form: using the employment income tab instead of the business income tab
Frequently Asked Questions: Self-Employed KRA Returns
Do self-employed people need to file KRA returns in Kenya?
Yes. Every self-employed individual with a KRA PIN is required to file an annual income tax return by 30th June each year, declaring all business income earned in the previous year.
What tax rate applies to self-employed income in Kenya?
Self-employed income is taxed at the same individual rates as employment income, ranging from 10% on the first Ksh 24,000 per month up to 35% on income above Ksh 800,000 per month. The annual personal relief of Ksh 28,800 applies.
Can self-employed people deduct business expenses from their tax?
Yes. Expenses incurred wholly and exclusively for business purposes are deductible from gross income before calculating taxable profit. This includes rent, wages, stock costs, fuel, insurance, and professional fees.
What is instalment tax and does it apply to me?
If your annual tax liability is expected to exceed Ksh 40,000, you are required to pay instalment tax in four instalments during the year. Failure to pay attracts a penalty of 20% of the shortfall plus interest.
How do I file KRA returns if I have no formal accounting records?
You should reconstruct your income and expenses from bank statements, mobile money records, and any available receipts. A CPA can assist with this process. Filing an estimated return is better than not filing at all.
Where can I get help filing self-employed KRA returns in Meru County?
Mutea and Associates CPA is based in Nkubu, Meru County, and handles self-employed KRA returns for clients across Meru, Isiolo, Tharaka Nithi, Embu and Kirinyaga.
Self-employed in Meru County? Let us handle your KRA returns.
Mutea and Associates Certified Public Accountants in Nkubu files KRA returns for self-employed individuals, freelancers, and sole traders across Meru, Isiolo, Tharaka Nithi, Embu and Kirinyaga. Accurate, compliant, and filed well before the June 30 deadline.
If your business is also required to comply with E-TIMS invoicing requirements, we can help with that too. See our E-TIMS boarding and compliance services.
