What is a tronc and why does it save National Insurance?

A tronc is a separate arrangement for sharing out tips, gratuities and service charges, run by a troncmaster rather than the employer. If the employer plays no part, directly or indirectly, in deciding who gets what, HMRC disregards the payments for Class 1 National Insurance, so neither employee nor employer NI is due. Income Tax is still due. The saving is 8% employee NI (2% above £50,270) plus 15% employer NI. Money from a mandatory service charge always attracts NI, even through a tronc.

When does the Employment (Allocation of Tips) Act 2023 apply?

Its main provisions took effect on 1 October 2024. Employers must pass on all qualifying tips, gratuities and service charges to workers, with no deductions other than those required or authorised by statute, such as Income Tax, and by the end of the month after the customer paid. It covers tips the employer receives or controls - card tips, service charges, and cash tips the employer collects or tells staff how to share. The Act does not change the tax treatment: Income Tax is still due, and NI still depends on who controls the allocation.

Does an independent tronc still need to operate PAYE?

Yes. A PAYE scheme for the tips is set up in the troncmaster's name, and the troncmaster is personally responsible for running it, deducting Income Tax from each worker's share using their tax code and reporting through RTI. The saving from a tronc is on National Insurance only; Income Tax is the same whether tips arrive through a tronc or as ordinary wages. Where tips are paid through the employer's payroll in shares the employer decides, NI applies as well.

When does the employer-controlled treatment apply (PAYE plus NIC)?

If the employer decides how tips are split, or the troncmaster in practice follows the employer's wishes, HMRC treats the tips as ordinary earnings. Employee Class 1 NI (8% / 2%) and employer NI (15% above the £5,000 Secondary Threshold) then apply, alongside Income Tax. HMRC's National Insurance Manual from NIM02940CO sets out the tests: the question is whether the employer plays any part, directly or indirectly, in deciding who gets what (NIM02942).

What counts as a "qualifying tip" under the Act?

Tips, gratuities and service charges paid by customers that the employer receives, or over which it exercises control or significant influence. Card tips, tips paid into the till and service charges (whether added automatically or optional) are covered. Cash tips handed straight to a worker and kept, with no employer involvement, are outside the Act. If the employer collects cash tips and redistributes them, or tells staff how to share them, they are likely to be covered.

Are tips counted toward National Minimum Wage?

No. For pay reference periods starting on or after 1 October 2009, tips, gratuities, service charges and cover charges paid by customers do not count towards National Minimum Wage pay, even if paid through the payroll. The employer must pay at least the statutory hourly rate from the base wage alone. Tips and tronc payments are on top.

How are tips reported for tax if I receive cash directly?

Cash tips received directly from customers, with no employer involvement, are still taxable, but PAYE does not deduct tax from them because the employer does not pay them. You report the amount through Self Assessment if you file a return, or otherwise through your personal tax account or the Income Tax helpline, and HMRC usually adjusts your tax code to collect the tax. No National Insurance is due on tips paid directly to you in this way.

Tronc and Tips Tax on a £35,000 Base Wage 2026/27

A hospitality worker with a £35,000 base wage takes home £28,720 from base pay after PAYE and Class 1 NIC. Adding a typical £7,000 of annual tips under a genuine independent tronc adds £5,600 to take-home (PAYE of £1,400 only - no employee NIC). The same tips paid through the employer's payroll would lose another £560 to employee Class 1 NIC. Verified against the HMRC PAYE Manual and the Employment (Allocation of Tips) Act 2023.

Total take-home (base + tips, tronc)

£34,320

Monthly £2,860

Tronc NIC saving

£560

Vs employer-controlled at £7,000 tips

Effective tax on tips

20.0%

PAYE only - independent tronc

How the tronc treatment changes take-home on £35,000 base + £7,000 tips

Base wage of £35,000 gives £28,720 take-home regardless of tips treatment - PAYE and Class 1 NIC are deducted from base pay as normal.
With an independent tronc, the £7,000 of tips faces only PAYE income tax: £1,400. Take-home from tips alone is £5,600.
Under employer-controlled tip pooling, the same £7,000 attracts both PAYE (£1,400) and employee Class 1 NIC (£560). Take-home from tips falls to £5,040.
The worker's saving from operating through a genuine independent tronc is £560 per year. The employer also saves 15% Class 1 secondary NIC on the same tips - the wider commercial case for the structure.

All three tip levels at £35,000 base

Tips at 10%, 20%, and 30% of base, showing the tronc vs employer-controlled split. Adjust freely on the main calculator.

Scenario	Tips	PAYE on tips	Tronc take-home (tips)	Employer-controlled take-home (tips)	NIC saving
10% of base (modest tips)	£3,500	£700	£2,800	£2,520	£280
20% of base (typical mid-tier)	£7,000	£1,400	£5,600	£5,040	£560
30% of base (strong tipping role)	£10,500	£2,100	£8,400	£7,560	£840

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Related calculators

Tronc and tips calculator - change base wage, tips, scheme, region, and tax year.
Salary calculator at £35,000 - the base-wage engine that drives the take-home portion here.
Hourly rate calculator - convert National Minimum Wage hourly pay to annual gross.
Statutory Sick Pay calculator - SSP entitlement is based on NICable earnings, so tronc income does not count.

Frequently asked questions

What is a tronc and why does it save National Insurance?: A tronc is a separate arrangement for sharing out tips, gratuities and service charges, run by a troncmaster rather than the employer. If the employer plays no part, directly or indirectly, in deciding who gets what, HMRC disregards the payments for Class 1 National Insurance, so neither employee nor employer NI is due. Income Tax is still due. The saving is 8% employee NI (2% above £50,270) plus 15% employer NI. Money from a mandatory service charge always attracts NI, even through a tronc.
When does the Employment (Allocation of Tips) Act 2023 apply?: Its main provisions took effect on 1 October 2024. Employers must pass on all qualifying tips, gratuities and service charges to workers, with no deductions other than those required or authorised by statute, such as Income Tax, and by the end of the month after the customer paid. It covers tips the employer receives or controls - card tips, service charges, and cash tips the employer collects or tells staff how to share. The Act does not change the tax treatment: Income Tax is still due, and NI still depends on who controls the allocation.
Does an independent tronc still need to operate PAYE?: Yes. A PAYE scheme for the tips is set up in the troncmaster's name, and the troncmaster is personally responsible for running it, deducting Income Tax from each worker's share using their tax code and reporting through RTI. The saving from a tronc is on National Insurance only; Income Tax is the same whether tips arrive through a tronc or as ordinary wages. Where tips are paid through the employer's payroll in shares the employer decides, NI applies as well.
When does the employer-controlled treatment apply (PAYE plus NIC)?: If the employer decides how tips are split, or the troncmaster in practice follows the employer's wishes, HMRC treats the tips as ordinary earnings. Employee Class 1 NI (8% / 2%) and employer NI (15% above the £5,000 Secondary Threshold) then apply, alongside Income Tax. HMRC's National Insurance Manual from NIM02940CO sets out the tests: the question is whether the employer plays any part, directly or indirectly, in deciding who gets what (NIM02942).
What counts as a "qualifying tip" under the Act?: Tips, gratuities and service charges paid by customers that the employer receives, or over which it exercises control or significant influence. Card tips, tips paid into the till and service charges (whether added automatically or optional) are covered. Cash tips handed straight to a worker and kept, with no employer involvement, are outside the Act. If the employer collects cash tips and redistributes them, or tells staff how to share them, they are likely to be covered.
Are tips counted toward National Minimum Wage?: No. For pay reference periods starting on or after 1 October 2009, tips, gratuities, service charges and cover charges paid by customers do not count towards National Minimum Wage pay, even if paid through the payroll. The employer must pay at least the statutory hourly rate from the base wage alone. Tips and tronc payments are on top.
How are tips reported for tax if I receive cash directly?: Cash tips received directly from customers, with no employer involvement, are still taxable, but PAYE does not deduct tax from them because the employer does not pay them. You report the amount through Self Assessment if you file a return, or otherwise through your personal tax account or the Income Tax helpline, and HMRC usually adjusts your tax code to collect the tax. No National Insurance is due on tips paid directly to you in this way.