On 27 March 2026, the Kingdom of Lesotho promulgated the Income Tax (Amendment of Monetary Amounts) Regulations, 2026 under Legal Notice No. 24 of 2026, which came into operation on 1 April 2026. Issued pursuant to section 212(1)(c) of the Income Tax Act 9 of 1993, these Regulations introduce targeted amendments to key monetary thresholds applicable to individual taxpayers. The amendments do not alter the structure of the tax system but rather recalibrate existing thresholds and credits to reflect prevailing economic conditions, particularly inflation and cost-of-living pressures.
The Regulations amend section 73 of the principal Act, which deals with the personal (non-refundable) tax credit, as well as the Second Schedule, which governs income tax thresholds and applicable rates. In doing so, they repeal the prior 2025 amendment regulations, thereby consolidating the updated monetary framework into a single operative instrument. The legislative intention is clearly to provide relief to taxpayers without fundamentally restructuring the existing tax regime.
A key amendment introduced by the Regulations is the increase in the personal tax credit from M11,640.00 to M12,240.00 per annum, equivalent to M1,020.00 per month. This adjustment operates as a direct reduction in tax liability for resident individuals, as the credit is deducted from the tax payable after the application of the relevant rates. As the credit remains non-refundable, it may reduce tax liability to zero but cannot result in a tax refund, thereby maintaining its character as a relief mechanism rather than a transfer benefit.
In addition, the threshold for the lower tax bracket has been increased from M74,040.00 to M77,760.00 per annum, or M6,480.00 per month. Income within this threshold continues to be taxed at 20%, while income exceeding the threshold remains subject to tax at 30%. The revised tax structure therefore retains the existing two-tier system, with adjustments limited to the monetary bands rather than the applicable rates. The Revenue Services Lesotho (RSL) has confirmed that these changes apply to all resident individuals, including employees (for PAYE purposes), sole traders, and pensioners.
The revised income tax structure for resident individuals is summarised as follows:
| Chargeable Income | Rate of Tax |
|---|---|
| First M77,760.00 per annum (or M6,480.00 per month) | 20% |
| Above M77,760.00 per annum (or M6,480.00 per month) | 30% |
A non-refundable tax credit of M12,240.00 per annum (or M1,020.00 per month) is applicable to each resident individual.
In practical terms, the amendments alter the calculation of tax liability in a manner that provides meaningful relief, particularly for lower- and middle-income earners. Where an individual’s income falls below M77,760.00 per annum, tax is calculated at 20% and thereafter reduced by the applicable tax credit. Where income exceeds this threshold, tax is calculated as M15,552.00 plus 30% of the amount exceeding M77,760.00, from which the tax credit is then deducted. The effect of the increased credit is that a significant portion of lower-income earners will have little to no tax liability, as the credit offsets the calculated tax.
The practical operation of these provisions is illustrated in the official RSL tables below:
Table 1: Tax Calculations Based on Annual Amounts
| Chargeable Income (Per Annum) | Tax Credit | 20% on First M77,760 | 30% on Excess | Tax Payable |
|---|---|---|---|---|
| M12,000.00 | M12,240.00 | M2,400.00 | M0.00 | M0.00 |
| M61,200.00 | M12,240.00 | M12,240.00 | M0.00 | M0.00 |
| M77,760.00 | M12,240.00 | M15,552.00 | M0.00 | M3,312.00 |
| M114,000.00 | M12,240.00 | M15,552.00 | M10,872.00 | M14,184.00 |
Table 2: Tax Calculations Based on Monthly Amounts
| Chargeable Income (Per Month) | Tax Credit | 20% on First M6,480 | 30% on Excess | Tax Payable |
|---|---|---|---|---|
| M1,000.00 | M1,020.00 | M200.00 | M0.00 | M0.00 |
| M5,100.00 | M1,020.00 | M1,020.00 | M0.00 | M0.00 |
| M6,480.00 | M1,020.00 | M1,296.00 | M0.00 | M276.00 |
| M9,500.00 | M1,020.00 | M1,296.00 | M906.00 | M1,182.00 |
These tables demonstrate that individuals earning below approximately M61,200.00 per annum incur no tax liability, as the tax credit fully offsets the tax otherwise payable. This reflects a deliberate policy choice aimed at protecting low-income earners and enhancing disposable income at the lower end of the income spectrum. At higher income levels, while taxpayers continue to be subject to the same marginal rates, the expanded lower bracket provides modest relief by reducing the portion of income taxed at the higher rate.
From a compliance perspective, the amendments impose immediate obligations on employers to update payroll systems and ensure that PAYE deductions are aligned with the revised thresholds and tax credit from 1 April 2026. Failure to correctly implement these changes may result in inaccurate tax deductions, potentially exposing employers to penalties or administrative complications. Tax practitioners and advisors must likewise ensure that tax planning strategies and compliance frameworks are updated to reflect the revised monetary thresholds.
From a broader legal and policy standpoint, the amendments exemplify the use of monetary adjustments as a mechanism to preserve the integrity of a tax system in the face of inflation. By increasing both the tax-free threshold (through the credit) and the lower bracket ceiling, the Regulations mitigate the effects of “bracket creep”, whereby taxpayers are pushed into higher tax brackets without a corresponding increase in real income. The amendments therefore reinforce the progressive nature of the tax system and promote greater equity in the distribution of the tax burden.
In conclusion, the Income Tax (Amendment of Monetary Amounts) Regulations, 2026 constitute a measured and pragmatic intervention within Lesotho’s income tax framework. While limited in scope, the amendments provide tangible relief to taxpayers, enhance fairness within the system, and maintain administrative simplicity. In the absence of broader structural reform, such periodic adjustments remain essential to ensuring that the tax regime remains responsive to economic realities and continues to achieve its fiscal and social objectives.