Have you ever looked at your payslip and wondered why a portion of your salary goes to PAYE? Or perhaps you have received a salary increase but are unsure how much of it you will actually take home?
Malawi's PAYE tax bands changed, affecting how employment income is taxed. The revised rates took effect on 30 December 2025, introducing a 40% top rate for monthly taxable income above K10 million, alongside the existing-style 30% and 35% bands.
Whether you are an employee or managing payroll, understanding these changes can help you calculate deductions accurately and plan your finances.
What is PAYE and how does it work in Malawi?
PAYE, short for Pay As You Earn, is a method used by the Malawi Revenue Authority (MRA) to collect income tax from employees' earnings. Instead of waiting until the end of the year, employers deduct the applicable tax from employees' remuneration when salaries are paid and remit it to MRA.
To understand your payslip, it helps to distinguish three terms:
- Gross salary: Your earnings before deductions.
- PAYE: The income tax deducted from your earnings.
- Net salary: What remains after PAYE and other applicable deductions.
Malawi uses a progressive tax system, meaning different portions of your taxable income are taxed at different rates.
What are the new PAYE tax rates in Malawi?
Following the 2025/26 Mid-Year Budget Review, Malawi introduced revised PAYE tax bands, effective from 30 December 2025. The changes increased the tax-free income threshold, removed the previous 25% tax bracket and introduced a higher tax rate for top earners.
The new monthly PAYE tax bands are:
Monthly taxable income | PAYE rate |
First K170,000 | 0% |
K170,001–K1,570,000 | 30% |
K1,570,001–K10,000,000 | 35% |
Above K10,000,000 | 40% |
Previously, the tax-free threshold was K150,000, and a 25% tax bracket applied to part of employees' taxable income.
Under the revised structure, employees earning up to K170,000 in monthly taxable income pay no PAYE. Higher earners are taxed progressively, meaning only the portion falling within each band attracts that band's rate.
How to calculate PAYE in Malawi
The easiest way to calculate PAYE in Malawi is to apply the relevant tax rate to each portion of an employee's monthly taxable income. Monthly taxable income in this case means monthly employment income after allowable deductions, not necessarily gross salary.
Let's use an employee earning K1,000,000 in monthly taxable income as an example.
Step 1: Identify the tax-free portion
The first K170,000 is tax-free.
K170,000 × 0% = K0
Step 2: Calculate tax on the next portion
The remaining taxable income is:
K1,000,000 − K170,000 = K830,000
This falls within the 30% tax bracket.
K830,000 × 30% = K249,000
Step 3: Add the tax amounts
K0 + K249,000 = K249,000
Estimated monthly PAYE: K249,000
The employee would therefore have K751,000 remaining after PAYE, before pension contributions and any other applicable deductions.
Another example: An employee earning K2 million
What happens when an employee's income falls into more than one tax bracket?
Tax calculation | PAYE |
First K170,000 × 0% | K0 |
Next K1,400,000 × 30% | K420,000 |
Remaining K430,000 × 35% | K150,500 |
Total monthly PAYE | K570,500 |
The employee therefore has K1,429,500 remaining after PAYE, before other deductions.
The important thing to remember is that the 35% rate does not apply to the entire K2 million. It applies only to the portion exceeding K1.57 million.
rézoluHR provides a PAYE calculator that employees and employers can use to check their calculations.
How much PAYE will you Pay on your salary?
One of the easiest ways to understand the new PAYE tax bands is to see how they affect different salary levels. The table below shows the estimated monthly PAYE deductions for employees earning different amounts.
Monthly taxable income | Estimated PAYE | Balance after PAYE |
K150,000 | K0 | K150,000 |
K200,000 | K9,000 | K191,000 |
K300,000 | K39,000 | K261,000 |
K500,000 | K99,000 | K401,000 |
K750,000 | K174,000 | K576,000 |
K1,000,000 | K249,000 | K751,000 |
K1,500,000 | K399,000 | K1,101,000 |
K2,000,000 | K570,500 | K1,429,500 |
These figures assume that the amounts shown are monthly taxable income and that no other deductions have been applied.
For example, an employee earning K500,000 in monthly taxable income pays approximately K99,000 in PAYE, leaving K401,000 before pension contributions and other deductions.
What do the new PAYE rates mean for employers and HR teams?
For employers, changes to PAYE tax bands mean payroll systems and calculations must be kept up to date. Using outdated tax rates can result in incorrect employee deductions, payroll discrepancies and difficulties reconciling tax payments.
HR and payroll teams should take the following steps:
- Update payroll systems: Ensure the revised MRA tax bands are applied.
- Review employee earnings: Check salaries, taxable allowances and other relevant employment benefits.
- Verify payslips: Confirm that PAYE deductions are calculated correctly.
- Maintain payroll records: Keep accurate records of salaries, deductions and payments.
- Meet payment deadlines: Remit deducted PAYE to MRA by the 14th day of the following month unless MRA specifies a different deadline or arrangement.
These practices help organizations maintain accurate payroll records and meet their tax obligations.
Can payroll software make PAYE calculations easier?
Calculating PAYE manually for a few employees may be manageable. However, as an organization grows, processing monthly salaries, applying tax bands, and checking deductions for every employee can become time-consuming.
Payroll software helps automate these processes, reducing repetitive calculations and making payroll administration more efficient.
When choosing payroll software in Malawi, businesses should consider features such as:
- Automatic PAYE calculations using current MRA tax bands.
- Accurate payslip generation.
- Employee salary and deduction management.
- Payroll reports and historical records.
- Support for changing statutory requirements.
This is where rézoluHR can help. The platform automatically calculates PAYE using the current MRA tax bands, so HR and payroll teams do not have to calculate each employee's tax manually.
Conclusion — stay updated on Malawi's PAYE tax changes
Understanding Malawi's new PAYE tax bands helps employees make sense of their salary deductions and enables employers to manage payroll more accurately. Whether you are checking your payslip or processing salaries, applying the correct tax rates is essential.
For HR teams looking to simplify payroll administration, rézoluHR automatically calculates PAYE using the current MRA tax bands, eliminating the need for manual tax calculations. Explore rézoluHR and make monthly payroll processing easier.
About the author
Samuel Msiska has over 5 years of experience writing and editing content on a wide range of topics. He has worked with Benzinga, crypto.news, Metabolon, OppKey, and several other projects.
