If you own a car in Kenya, get ready yourself for new mandatory fee of at least KSh 1,500 per year as per new road rules. Whether you’re driving in a compact or commanding a high end SUV, this freshly gazetted levy applies to every motorist, tied directly to your car’s value. This amount will collected through your insurance renewal, but what exactly is it funding? Will these charges become higher in future? Want to know full impact? and what this new rule means to you? read the complete post below.
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All Car Owners to Pay at Least Ksh 1500 Per Year
Starting in July 2025, the new rules related to taxation for every vehicle owner in Kenya is out. As per newly gazetted rules, car owners have to pay 2.5% of a car’s current market value each year which are just replacement of the flat annual fees as charges previously. Not just luxury vehicles will see higher payments but affordable or cheap car may also meet the baseline contribution. This policy is design to generate revenue for road projects and public services. Not only road shapes but this set to reshape the motoring landscape in Kenya.
New Advance Tax Rates in Kenya 2025 Summary
| New Rule | Mandatory annual vehicle circulation tax for all register car owners. |
| Minimum Tax | KSh 1,500 per year (as a baseline payment). |
| Full Tax Rate | 2.5% of the car’s current market value per year. |
| Maximum Limit | No maximum cap; high value cars may owe significantly more. |
| How to Pay | Collect during annual motor insurance renewal. |
| Applies To | All types of motor vehicles except those legally exempt. |
| Purpose of New Rules | To expand government revenue and support road infrastructure development. |
| Calculation Basis | Based on insurer assess & vehicle market value or default KSh 5,000 minimum. |
| Responsibility | Owners must ensure payment while renewing insurance coverage |
| Advice to Drivers | Check your vehicle’s valuation, adjust budget, and explore insurance options |
| How to Stay Updated | Visit or Open – NTSA, IRA, and Treasury announcements. |
What’s New in Road Rules For Car Owner?
The latest gazettes rules introduce a fresh twist; car owners must now pay a motor vehicle circulation tax set at 2.5% of their vehicle’s current market value every year. Similar earlier drafts, there’s no upper limit, which means high end car owners could pay high sums. However, a fix minimum of KSh 5,000 still applies, even for old or budget cars. The twist? This tax must paid before renewing your car insurance, making it an unavoidable annual expense for every motorist.
Does It Apply For You?
From July 2025 (pending parliamentary approval), every vehicle owner in Kenya must pay a yearly circulation tax. This include minimum KSh 5,000, even for older low-value cars and 2.5% of the car’s current market value for higher-end vehicles, with no cap. This tax is pay through your insurance at the time of renewal.
Important Note – Exemptions include ambulances, police cars, military vehicles, intelligence vehicles, and govt. own vehicles covered by the Privileges & Immunities Act.
Amount You Have to Pay?
As we mention above; even the modest cars face a KSh 5,000 minimum, while mid to high range vehicles could owe tens or hundreds of thousands annually. Previous caps of KSh 100,000 have scrap, significantly impacting luxury vehicle owners. Vehicle price wise annual tax details is given below.
| Vehicle Price (KES) | Annual Tax at 2.5% |
| 1 Million | 25,000 |
| 4 Million | 100,000 |
| 10 Million | 250,000 |
| 15 Million | 375,000 |
Timeline For New Rules
Well, the parliament must approve the finance bill in Mid 2025. After the implementation of this new rule, Insurers begin tax collection during policy renewal. One must remember this; the car values are confirm via insurance valuation systems or owner declaration.
What It Means of Missing Payment?
As we clear above that tax agents under insurance companies act will collect the payment. These agents have to pay tax payments within five days. If unable to pay; then have to pay 50% of penalty on the unpaid amount, plus the original tax.
What Drivers Should Do?
Car owners in Kenya should start by estimating how much they’ll owe; either 2.5% of their car’s current value or the KSh 5,000 minimum. It’s smart to adjust your annual insurance budget to include this new rules. One should speak with your insurance provider to understand how they will value your car, as this will directly impact your tax amount.
If the added cost pushes premiums higher, consider whether a basic third-party policy might more manageable than full coverage. Finally, keep an eye on any updates like possible exemptions or changes to how the rule is rolled out. Staying inform will help you plan ahead and avoid surprises.
Why this Change?
The Treasury introduce this shift to broaden tax revenue and fund key national projects; such as roads, healthcare, and education. Linking tax to vehicle value means wealthier car owners contribute more, while even budget vehicles make a contribution.
Final Thoughts
The days of flat car charges are over. This Newly introduce vehicle tax is a bold step towards fiscal prudence and equity; but it is not without controversy. Kenyans must now think of car insurance as more than coverage; it is a wealth linked tax gateway. Whether this leads to better roads, hospitals, and schools; or squeezes everyday drivers, only time will tell.