TAX POLICY : WHAT IT MEANS FOR YOU
Ghana’s New Tax Bands: More Tax-Free Income, But Who Will Really Pay Less?
By Isaac Owusu, CA, IIA-Ghana & Robert Louis Mohoasem, CA
Ghana’s personal income tax structure has changed — and the impact on employees and individual taxpayers deserves more attention than the headline numbers may suggest.
President John Dramani Mahama assented to the Income Tax (Amendment) Act, 2026 on 26 August 2026. One of the major changes is an increase in the annual tax-free threshold from GH¢5,880 to GH¢7,056, giving taxpayers an additional GH¢1,176 of income that will not be subject to income tax.
At first glance, this appears to be a straightforward tax relief — and for many lower-income earners, it is. But there is another important part of the story.
While the tax-free threshold has increased, the 17.5% tax band has been reduced from GH¢38,000 to GH¢34,800. As a result, the point at which the 25% marginal tax rate begins has moved from GH¢46,760 to GH¢44,016. This means the impact of the reform will not be the same for everyone.
For some taxpayers, PAYE will fall. For others, the benefit of the higher tax-free threshold could be partly offset as their income moves into higher tax bands. Understanding this requires us to first understand how PAYE actually works.
PAYE: What Are You Really Paying?
PAYE means Pay As You Earn. It is the income tax deducted by your employer from your salary and paid to the Ghana Revenue Authority on your behalf.
But PAYE is not simply a fixed percentage of your salary.
Ghana operates a progressive income tax system: different portions of your chargeable income are taxed at different rates. This is a point many employees misunderstand.
If you enter the 25% tax band, it does not mean that 25% of your entire salary suddenly becomes tax. Rather, the 25% rate applies only to the portion of your chargeable income that falls within the 25% band. The earlier portions continue to be taxed at the lower applicable rates.
THINK OF IT AS A STAIRCASE
You start at the 0% step, then move to 5%, 10%, 17.5%, 25%, 30% and eventually 35% as your chargeable income increases. You do not suddenly pay the highest rate on everything simply because you have reached a higher step.
Current Personal Income Tax Bands
Under the rates that took effect from 1 January 2024, the annual and monthly chargeable income of a resident individual is taxed progressively as follows:
Annual Chargeable Income
Rate
Monthly Chargeable Income
Rate
First GH¢5,880
0%
First GH¢490
0%
Next GH¢1,320
5%
Next GH¢110
5%
Next GH¢1,560
10%
Next GH¢130
10%
Next GH¢38,000
17.5%
Next GH¢3,166.67
17.5%
Next GH¢192,000
25%
Next GH¢16,000
25%
Next GH¢366,240
30%
Next GH¢30,520
30%
Above GH¢600,000
35%
Above GH¢50,000
35%
The New Personal Income Tax Bands
The Ghana Revenue Authority will issue a public notice announcing the effective implementation date for the new rates below.
Annual Chargeable Income
Rate
Monthly Chargeable Income
Rate
First GH¢7,056
0%
First GH¢588
0%
Next GH¢960
5%
Next GH¢80
5%
Next GH¢1,200
10%
Next GH¢100
10%
Next GH¢34,800
17.5%
Next GH¢2,900
17.5%
Next GH¢192,000
25%
Next GH¢16,000
25%
Next GH¢363,984
30%
Next GH¢30,332
30%
Above GH¢600,000
35%
Above GH¢50,000
35%
What Has Changed in the New Rates
The New Act increases the annual tax-free threshold from GH¢5,880 to GH¢7,056 — an increase of GH¢1,176, or 20%. Individuals must now earn a larger amount of chargeable income before becoming liable to pay personal income tax.
Nonetheless, the New Act also reduces the income covered by the 5%, 10%, 17.5%, and 30% bands — from GH¢1,320 to GH¢960, GH¢1,560 to GH¢1,200, and GH¢38,000 to GH¢34,800, and from GH¢366,240 to GH¢363,984. Consequently, the point at which the 25% marginal tax rate begins would reportedly fall from GH¢46,760 to GH¢44,016 — a decrease of GH¢2,744.00, or 5.87%.
These changes therefore create both potential benefits and costs for different categories of taxpayers. This distinction is essential when discussing the new tax regime.
The major changes at a glance
Key Feature
Current
New
Trend
Tax-free threshold
GH¢5,880
GH¢7,056
▲
17.5% band size
GH¢38,000
GH¢34,800
▼
Start of 25% band
GH¢46,760
GH¢44,016
▼
What the Changes Mean for Taxpayers
1. The Good News: Lower-Income Taxpayers May Benefit
The increase in the tax-free threshold is the clearest benefit of the new reform. Under the new structure, the first GH¢7,056 of annual chargeable income will not be subject to income tax — GH¢1,176 more than the current tax-free amount. For low-income earners, this can increase disposable income and reduce the PAYE deducted from their salaries at source, offering some relief from inflation and rising living costs.
2. The Point Not to Miss: Middle-Income Taxpayers Need to Look More Carefully
The impact is less straightforward for middle-income earners. Although the tax-free threshold increases, the 17.5% band becomes smaller — so taxpayers could reach the 25% marginal tax rate at a lower level of income. Under the current structure, the 25% band begins after GH¢46,760 of annual chargeable income; under the new structure, this threshold falls to GH¢44,016. Some middle-income taxpayers could therefore benefit from the higher tax-free threshold while also having a larger portion of their income exposed to the 25% rate. The overall effect will depend on the taxpayer’s chargeable income.
What Does This Mean for PAYE Employees?
Employees will mainly experience the changes through the PAYE system. Employers are responsible for calculating and deducting PAYE from employees’ salaries and paying the tax to the Ghana Revenue Authority. Once implementation begins, payroll departments will need to update their tax tables and systems — employees may consequently see changes in the PAYE deductions shown on their payslips.
Employees should therefore:
● Review their payslips after the new rates become effective.
● Confirm that their chargeable income has been correctly calculated.
● Check that applicable tax reliefs and deductions have been properly considered.
● Ask their employer or payroll department for clarification where necessary.
What Employers Should Do
Employers and finance departments should prepare for the possible implementation of the new tax bands. They should:
1. Review the new tax rates and thresholds.
2. Assess the potential impact on employees’ net salaries.
3. Update payroll software and PAYE calculations once implementation takes effect.
4. Communicate changes clearly to employees.
5. Reconcile PAYE deductions with payroll records and GRA returns.
For medium-sized businesses with many employees, even small changes in individual PAYE calculations can have a significant impact on total payroll costs and employee take-home pay.
Impact on Small Businesses and Self-Employed Persons
The Act is also relevant to individuals operating businesses. Ghana’s Modified Taxation Scheme provides simplified tax arrangements for certain individuals operating in the informal sector. Under the current presumptive tax based on turnover, qualifying businesses with annual sales above GH¢20,000 but not exceeding GH¢500,000 can be subject to a 3% tax on turnover. The new Act has adjusted the presumptive tax turnover threshold from a ceiling of GH¢500,000 to GH¢700,000.
Small business owners should therefore pay attention not only to the personal income tax bands but also to changes affecting simplified taxation arrangements, and should maintain proper records of sales, expenses, and other relevant transactions to determine their correct tax obligations.
Conclusion
The new Income Tax (Amendment) Act, 2026 brings meaningful changes to personal income taxation in Ghana. The increase in the tax-free threshold from GH¢5,880 to GH¢7,056 will provide relief to lower-income taxpayers by allowing more income to be earned tax-free.
However, the reduction in the 17.5% band from GH¢38,000 to GH¢34,800, and the reported reduction in the threshold for entering the 25% band from GH¢46,760 to GH¢44,016, mean that the impact will differ depending on a taxpayer’s income level.
The key takeaway: taxpayers should look beyond the headline increase in the tax-free threshold. The interaction between all the tax bands, chargeable income, deductions, and tax reliefs will determine the actual impact on individual taxpayers.
ABOUT THE AUTHORS
Isaac Owusu
CA, IIA-Ghana
Robert Louis Mohoasem
CA
