If you get tips at work, they don’t count towards the National Minimum Wage, but you do have to pay tax on them.
How tips are paid
You could get your tips as:
- Cash at the end of a shift or from a customer
- Part of your pay packet
- An amount that’s pooled and shared between all staff – this is called a ‘tronc’ and the person who looks after it is called the ‘troncmaster’
How your employer handles tips
The government has a ‘Code of Best Practice’ on tips that says how your employer should handle them. It’s voluntary – your employer doesn’t have to follow it – but if they do, they should have a policy on tips that includes information on:
- How tips are distributed (eg if a tronc is used)
- If cash and card tips are treated differently
- The name of the troncmaster (if there is one)
- Any deductions taken from tips
- What happens during leave (eg holidays, sick leave, parental leave)
Where to get help
If you have a question about tips or the National Minimum Wage, call the Pay and Work Rights Helpline:
Pay and Work Rights Helpline
Telephone: 0800 917 2368
Textphone: 0800 121 4042
Monday to Friday, 8am to 8pm
Saturday, 9am to 1pm
Tips and tax
You have to pay Income Tax on any tips you get, and sometimes National Insurance contributions as well. How your tax is worked out, and whether you have to pay National Insurance, depends on who:
- The tips are given to
- Decides how the tips are shared out
Cash tips paid directly to you
If you get cash tips directly from a customer, you have to pay tax on them but not National Insurance. If you fill in a Self Assessment tax return, you have to include the tips on it. If you don’t fill out a tax return then HM Revenue & Customs (HMRC) will estimate your tips based on information from you or your employer. HMRC will give your employer a tax code so they can collect tax through Pay As You Earn (PAYE). This is where tax is taken from your wages before you get them.
If you think your tax code is wrong, contact HMRC.
Tips included in card or cheque payments
If your employer pays these to you directly, they’re responsible for making sure Income Tax is paid through PAYE.
Sometimes the tips are pooled together and shared out – this is called a ‘tronc’. The person who looks after it is called the ‘troncmaster’ and they are responsible for making sure Income Tax is paid. If your employer decides how the tips are shared out, National Insurance is due as well as tax. Your employer is responsible for making sure it’s paid through PAYE.
Your employer has to tell HMRC if there’s a tronc and who the troncmaster is.
If you’re the troncmaster, you can get help on what to do from the HMRC Business Education and Support Team in your area.
These are added to the bill before it’s given to the customer. If the charge is compulsory, it’s not a tip so if your employer gives it to you, it’s treated in the same way as your wages. If it’s voluntary, you pay tax and National Insurance in the same way as for tips.
These are part of your pay and you’ll pay tax and National Insurance on them through PAYE.At Bizorb we aim to provide the most accurate and up to date information to you. This article contains public sector information licensed under the Open Government Licence v1.0. If you spot any errors in this article please let us know.