13 June 2026
Will M-Pesa charges increase in 2026? The honest answer is: possibly — but not in the way most articles and social media posts are describing it. Most Kenyans have read or heard that M-Pesa will get more expensive from July 1. Parliament’s own explanation of what the Finance Bill 2026 proposes contradicts much of what is circulating online. The distinction matters — because understanding it correctly tells you which transactions could cost more, by exactly how much, and what you can do about it.
This is that explanation.
Table of Contents
- Will M-Pesa Charges Increase from July 1, 2026? The Short Answer
- What the Finance Bill 2026 Actually Proposes on M-Pesa
- The Real Numbers — Before and After
- Fuliza and M-Shwari — Are These Affected?
- Card Payments and Merchant Charges — The Other Finance Bill Change
- Why the Industry Is Pushing Back
- What to Do If M-Pesa Fees Rise — Practical Steps
- Frequently Asked Questions
Will M-Pesa Charges Increase from July 1, 2026? The Short Answer
M-Pesa transaction charges in 2026 could increase — but what is being taxed is the fee, not the money. Here is the critical distinction that most coverage gets wrong:
What is NOT happening: The Finance Bill 2026 does not tax the value of the money you send via M-Pesa. If you send KES 5,000 to someone, that KES 5,000 is not being taxed. Parliament has been explicit on this.
What IS proposed: The Finance Bill 2026 proposes applying 16% VAT to the transaction fees that M-Pesa and other payment service providers charge for their services. The fee you pay to send money — currently around KES 49.57 for a KES 5,000 transfer — would attract 16% VAT on top of the existing 15% excise duty.
The practical effect: Instead of paying approximately KES 57 in total charges on a KES 5,000 send today, you would pay approximately KES 66 under the proposed framework — an 18.4% increase in transaction costs.
The status as of June 2026: This proposal is in the bill and is actively being contested by Safaricom, the Kenya Private Sector Alliance, and industry groups. The Finance and Planning Committee is still reviewing the bill. Amendments are possible before it is signed. The outcome is not yet final — but the proposal is real, the numbers are confirmed, and Kenyans should understand exactly what could change.
What the Finance Bill 2026 Actually Proposes on M-Pesa
Clause 31(b)(i) of the Finance Bill 2026 proposes to amend the VAT Act to remove digital payment and processing services from the existing VAT exemption that currently applies to money transfer services.
In plain language: M-Pesa fees are currently exempt from VAT. They attract only excise duty (currently 15% of the fee). The Finance Bill 2026 proposes adding 16% VAT on top of that excise duty.
Who is covered: The bill targets Kenya’s 42 licensed payment service providers. This includes:
- M-Pesa (Safaricom)
- Airtel Money
- Pesapal
- Kenswitch
- Cellulant
- Craft Silicon
- And 36 others
According to the Central Bank of Kenya, M-Pesa is licensed as a payment service provider (PSP), meaning its transfer fees fall directly under the Treasury’s proposed VAT provisions.
What specifically becomes taxable: Payment processing, settlement, merchant acquiring, gateway, and aggregation services provided through software or platforms for a fee or commission will be subject to 16% VAT. This covers peer-to-peer transfers, agent withdrawals, Paybill transactions, and merchant till payments — essentially the full range of M-Pesa’s service fee activities.
The combined tax burden: Kenya’s M-Pesa transaction fee structure currently attracts a 15% excise duty. Adding 16% VAT on top of that does not simply make the rate 31% — because of how VAT is calculated, the combined effective tax burden rises from 15% to 33.4% of the base service fee.
M-Pesa processes 46.4 billion transactions per year in Kenya, with users moving KES 41.7 trillion through the platform. Even a small per-transaction increase multiplied across that volume creates a significant national cost burden on Kenyan households.
What remains VAT-exempt: Some M-Pesa-linked services would remain exempt under the proposed framework. A Treasury official confirmed that Fuliza and M-Shwari would remain VAT-exempt since they operate as lending facilities rather than payment processing services. The VAT applies to the payment platform and fee-generating services — not to credit products built on top of it. See our Fuliza Kenya 2026 guide and M-Shwari vs KCB M-Pesa vs Fuliza comparisonfor how these products work and what they currently cost.
The Real Numbers — Before and After
Safaricom submitted detailed figures directly to Parliament showing what Clause 31(b)(i) would mean for specific transaction amounts. These are the most authoritative numbers available on what M-Pesa charges in 2026 could look like if the proposal passes unchanged.
M-Pesa Send Money — Confirmed Before and After (Safaricom to Parliament)
| Transaction amount | Current total cost | Cost under Finance Bill 2026 | Increase |
|---|---|---|---|
| KES 1,000 | ~KES 12–15 | ~KES 14–18 | ~KES 2–3 |
| KES 5,000 | KES 57 | KES 66.12 | KES 9.12 |
| KES 10,000 | Varies by tier | Higher by ~18.4% | ~KES 12–20 |
| KES 20,000 | Varies by tier | Higher by ~18.4% | ~KES 20–35 |
Source: Safaricom submission to National Assembly Departmental Committee on Finance, May 2026.
For the KES 5,000 example specifically: the base service fee is KES 49.57. Under current rules (15% excise duty only), the total cost is approximately KES 57. Under the Finance Bill proposal (15% excise + 16% VAT), the total fee becomes approximately KES 66.12 — meaning KES 16.55 of a KES 66.12 transaction cost goes to taxes, representing 33.4% of the original base fee.
What This Means for Regular M-Pesa Users
If you send money via M-Pesa five times a week — a reasonable estimate for an active user — the annual additional cost of the Finance Bill fee change would be approximately:
- 5 transactions × KES 9 average increase × 52 weeks = approximately KES 2,340 per year in additional transaction costs on medium-sized sends
This is not catastrophic — but it is real, and it falls disproportionately on lower-income Kenyans who conduct more frequent small transactions as a proportion of their income.
Will Safaricom absorb or pass through the cost? Based on how businesses handle VAT in Kenya, Safaricom will almost certainly pass the VAT cost through to users rather than absorbing it. The alternative — absorbing an 18.4% increase on every transaction at 46.4 billion transactions per year — would cost the company billions of shillings annually. That is not a realistic expectation.
Fuliza and M-Shwari — Are These Affected?
This is one of the most searched questions about the Finance Bill 2026 and M-Pesa — and the answer is reassuring for users of these products.
Some M-Pesa-linked services, including Fuliza and M-Shwari, would remain VAT-exempt since they operate through payment service infrastructure as lending facilities rather than as payment processing services.
What this means:
- Fuliza overdraft charges — not directly affected by the 16% VAT proposal
- M-Shwari loan fees — not directly affected by the 16% VAT proposal
- M-Pesa send money fees — would be affected if the proposal passes
- M-Pesa agent withdrawal fees — would be affected
- Paybill and till payment fees — would be affected
If you rely on Fuliza to bridge cash flow gaps or M-Shwari for short-term savings and credit, the Finance Bill 2026 does not directly change the cost of those products under the current proposal. For the complete picture of how these products work and what they cost today, see our M-Shwari vs KCB M-Pesa vs Fuliza guide.
Card Payments and Merchant Charges — The Other Finance Bill Change
The M-Pesa proposal is the most discussed Finance Bill digital payment change — but there is a second proposal that affects anyone who pays or accepts card payments in Kenya.
Clause 2 of the Finance Bill 2026 proposes widening the definition of “management fees” to include interchange fees and merchant service fees arising from card transactions — meaning Visa, Mastercard, Amex, China UnionPay, and other international card networks.
Under this proposal, a withholding tax applies:
- 5% withholding tax on local card transactions (domestic Visa/Mastercard)
- 20% withholding tax on non-resident card transactions (cross-border payments to international processors)
The Kenya Private Sector Alliance (KEPSA) submitted a memorandum to Parliament on May 25, 2026 showing what this means in practice. Using a Merchant Discount Rate of KES 100 as the base:
- Current cost: KES 115 (including 15% excise duty)
- After proposed 20% WHT + 16% VAT on MDR: KES 153.40
That is a 33.4% increase in merchant card processing costs — costs that businesses typically pass through to consumers in their pricing.
Who this affects:
- Supermarkets, restaurants, and petrol stations that accept card payments
- Online merchants accepting Visa/Mastercard for e-commerce
- Any business using a payment gateway (Pesapal, Cellulant, iPay Africa, Flutterwave)
The consumer effect is indirect but real: if the cost of accepting card payments rises 33% for merchants, the prices of goods and services at card-accepting businesses face upward pressure. This is one of the reasons the Kenya Private Sector Alliance has formally objected to the proposal.
Why the Industry Is Pushing Back
The industry opposition to the M-Pesa VAT proposal is significant — and it is an opposition that carries real weight with Parliament.
Safaricom’s formal submission to Parliament: Safaricom appeared before MPs to table its concerns directly, providing the detailed transaction cost modelling quoted in this article. The company’s position is that the 16% VAT on M-Pesa transaction fees would increase costs for 51 million mobile money users and could reverse financial inclusion progress that took a decade to build.
KPMG’s warning: KPMG East Africa tax expert Kiema Onesmus warned that the proposal risks pushing Kenyans back toward cash-based transactions at a time when Kenya has become a global model for mobile money adoption. A move toward cash reverses financial inclusion, increases transaction costs for the informal economy, and is harder to monitor and tax — creating a perverse outcome for the government’s own revenue goals.
The market competition argument: M-Pesa’s market share has already fallen from 97% in 2023 to 89% by late 2025, as Airtel Money gains ground on a lower-cost positioning. Higher M-Pesa fees would accelerate this competitive shift — and Airtel Money, with a smaller transaction volume base, would be less financially impacted by the same VAT charge. The biggest market share holder bears the most cost from a uniform VAT application.
The Finance Bill 2024 precedent: It is worth noting that the Finance Bill 2024 originally included a proposal to impose VAT on mobile money transfers — and that proposal was withdrawn before the bill was passed, following industry opposition. The 2026 proposal is differently structured (on fees rather than transfer values) but faces similar political dynamics.
Parliament’s Finance Committee position: The bill is still working through Parliament’s committee stage. The Finance and National Planning Committee is reviewing all submissions and has authority to amend clauses before the bill goes to a full vote. Whether Clause 31(b)(i) survives unchanged, is amended, or is dropped entirely will be determined in this process. Check our Kenya Finance Bill 2026 guide for the final outcome when the bill passes into law.
What to Do If M-Pesa Fees Rise — Practical Steps
Whether or not the Finance Bill 2026 M-Pesa proposal passes, understanding how to reduce your M-Pesa transaction costs is useful regardless. Here are the most effective adjustments:
Batch your transactions — fewer, larger sends are cheaper per shilling moved M-Pesa’s fee structure is tiered — sending KES 5,000 in one transaction costs significantly less than sending KES 1,000 five separate times. If you regularly send money to the same person or for the same purpose, consolidate into larger, less frequent transfers. The saving is real even under the current fee structure, and becomes more significant if VAT is added.
Use M-Pesa Paybill for bill payments Many bill payments via Paybill — electricity, water, DSTV, school fees — are either free or attract lower fees than peer-to-peer send money. Where you have a choice between paying via send money and paying via a Paybill number, use Paybill.
Consider Airtel Money for select transactions Airtel Money currently offers lower transaction fees than M-Pesa for some transaction corridors — particularly smaller amounts. If both sender and recipient have Airtel lines, this is worth comparing before your next transfer. The gap is likely to widen if M-Pesa’s VAT-inflated fees are passed through while Airtel’s smaller volume base allows more pricing flexibility.
Bank transfer for larger amounts For amounts above KES 10,000, a bank-to-bank transfer (free or very low cost between same-bank accounts) followed by a bank-to-M-Pesa transfer may be cheaper than a direct M-Pesa peer-to-peer send. The combined cost of a free interbank transfer plus a lower-tier M-Pesa deposit can come in below a direct high-value M-Pesa send. This is worth calculating for your most frequent large transactions.
For business owners accepting payments If the card merchant fee proposal passes, review whether some transactions currently processed through card networks could be redirected to Paybill or direct bank transfers — both of which are exempt from the interchange fee withholding tax proposal.
If you want to understand how rising M-Pesa costs could affect your broader monthly financial planning, our how to budget in Kenya 2026 guide covers practical tools for managing household cash flow in a higher-cost environment.
Frequently Asked Questions
Will M-Pesa charges increase from July 1, 2026? Possibly — but not certainly. The Finance Bill 2026 proposes 16% VAT on M-Pesa transaction fees, which would increase the cost of sending money by approximately 18.4% per transaction. This proposal is still being reviewed by Parliament’s Finance Committee and could be amended or dropped before the bill passes. If passed unchanged and Safaricom passes the cost through, M-Pesa fees will increase from approximately July 1, 2026.
What exactly does the Finance Bill 2026 do to M-Pesa? The Finance Bill 2026 proposes removing M-Pesa transaction fees from the current VAT exemption that applies to money transfer services, and subjecting them to 16% VAT instead. The tax applies to fees — not to the value of money transferred. Sending KES 5,000 would still cost KES 5,000 for the recipient; the change is in the transaction fee paid by the sender, which would rise from approximately KES 57 to KES 66.
Does the Finance Bill 2026 tax M-Pesa Fuliza or M-Shwari? No. Fuliza and M-Shwari operate as lending facilities and remain VAT-exempt under the current Finance Bill 2026 proposal. Only the payment processing fees charged by M-Pesa for sending, withdrawing, and paying via tills are affected by the proposed VAT.
How much will M-Pesa transaction fees increase under Finance Bill 2026? Based on Safaricom’s submission to Parliament: a KES 5,000 send that currently costs approximately KES 57 in fees would cost KES 66.12 under the Finance Bill proposal — an increase of KES 9.12, representing an 18.4% increase in transaction costs. Smaller transactions would see proportionally similar increases based on their current fee tier.
Why is Safaricom opposing the Finance Bill 2026 M-Pesa VAT proposal? Safaricom has formally submitted to Parliament that the 16% VAT on M-Pesa fees would increase costs for over 51 million mobile money users, risk reversing financial inclusion gains, and accelerate the competitive shift to lower-cost alternatives like Airtel Money. The company argues that its market position — handling 46.4 billion transactions and KES 41.7 trillion in annual transfers — means the cost burden of the VAT would be borne most heavily by ordinary Kenyans who depend on M-Pesa daily.
What is the Finance Bill 2026 doing to card payment fees? A separate clause in the Finance Bill 2026 proposes applying 5% withholding tax on local card (Visa/Mastercard) transaction fees and 20% withholding tax on non-resident card transaction fees. This increases merchant card processing costs by up to 33.4% and could push consumer prices upward at businesses that accept card payments.
The Bottom Line
M-Pesa charges in 2026 may increase — but the increase, if it happens, is specific, calculable, and manageable rather than the sweeping “M-Pesa is getting taxed” framing circulating on social media.
The Finance Bill 2026 M-Pesa VAT proposal is real, the numbers are confirmed by Safaricom’s own submissions to Parliament, and the mechanism (fee-level VAT, not transaction-value VAT) is now clearly understood. Whether it becomes law depends on what happens in Parliament’s committee stage before June 30.
What you should do now: understand which of your transactions would be affected, consider batching strategies to reduce the number of fee-generating events, and compare alternatives where genuine cost savings exist. And bookmark our Kenya Finance Bill 2026 guide — it will be updated the moment Parliament makes its final decision on this clause.
M-Pesa fee figures sourced from Safaricom’s formal submission to the National Assembly Departmental Committee on Finance (May 2026), Techweez Finance Bill M-Pesa analysis (June 1, 2026), Tuko.co.ke Treasury VAT proposal coverage (May 2026), Kenya Times Finance Bill 2026 (May 2026), and KEPSA Finance Bill submission (May 25, 2026). Finance Bill 2026 clause references verified against National Treasury official bill text via parliament.go.ke. This article reflects the bill as proposed — the final outcome depends on parliamentary amendments before June 30, 2026. This article is for informational purposes only. Last updated: June 13, 2026.