Government has increased funding for public sector salaries to Shs9.7 trillion in the 2026/27 national budget, marking one of the key spending priorities in the newly approved Shs84.4 trillion fiscal plan.
The allocation, up from Shs8.57 trillion in the previous financial year, is expected to finance salary enhancements for teachers, health workers and security personnel, while supporting the delivery of public services across the country.
Finance Minister Henry Musasizi presented the budget as a roadmap towards greater economic self-reliance, balancing increased domestic revenue mobilisation with measures aimed at easing the tax burden on low-income earners.
The expanded wage bill is expected to improve earnings for thousands of public servants, particularly in critical sectors that have long called for better remuneration. It also reflects government’s continued investment in human capital development as it seeks to strengthen education, healthcare, and national security.
Alongside increased salary expenditure, the budget introduces significant reforms to the Pay As You Earn (PAYE) tax system. The monthly tax-free threshold has been raised from Shs235,000 to Shs335,000, meaning workers earning below that amount will no longer pay income tax.
The reform is expected to leave about Shs96 billion in the hands of low-income earners, increasing disposable income and boosting household spending power.
However, individuals earning more than Shs10 million per month will continue to be taxed at the highest progressive rate of 40 percent, ensuring higher-income earners contribute a larger share to government revenue.
Despite relief measures for low-income workers, households are expected to feel the impact of increased excise duties on several commonly used goods.
The excise duty on cane and beet sugar has been tripled from Shs100 to Shs300 per kilogram, while cooking oil now attracts a doubled duty of Shs400 per litre. A new levy of Shs500 per litre or kilogram has also been introduced on cooking fat.
Construction materials have also been affected, with excise duty on cement, white cement and lime increasing from Shs500 to Shs750 per 50-kilogram bag. Locally manufactured paints will now attract a 3 percent tax or Shs50 per litre, while imported paints will be taxed at 10 percent or Shs2,000 per litre.
Other measures include an increase in the environmental levy on imported second-hand clothes from 15 percent to 30 percent, and a rise in betting tax from 20 percent to 30 percent. Excise duty on alcoholic beverages and spirits has also been increased to Shs3,500 per litre.
To support small businesses, government has doubled the annual value-added tax registration threshold to Shs300 million, a move expected to reduce compliance costs and administrative burdens for small enterprises.
Overall, the 2026/27 budget combines higher public sector spending with targeted tax reforms aimed at improving incomes for low-wage earners while generating additional domestic revenue to finance national priorities.