UK Tronc and Tips Taxation 2026/27
How tips are taxed in 2026/27: cash tips, employer-paid tips, troncs and service charges, when National Insurance is due, and the fair tipping law.
Tax and NI by how the tip is paid
| How the tip reaches the worker | Income Tax | National Insurance |
|---|---|---|
| Customer gives it to the worker, who keeps it | Yes, usually via tax code; worker reports it | No |
| Employer decides the shares and pays them | Yes, PAYE | Yes, employee 8% and employer 15% |
| Independent troncmaster decides the shares | Yes, PAYE on the tronc scheme | No |
| Mandatory service charge paid to staff | Yes, PAYE | Yes, however it is shared |
Source: HMRC E24 and GOV.UK "Employee gets tips through a tronc". NI rates are the 2026/27 Class 1 main and secondary rates.
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Frequently asked questions
How are tips taxed in the UK in 2026/27?
Tips are always subject to Income Tax. Whether National Insurance is due depends on who decides how they are shared (HMRC E24): (1) tips a customer gives straight to a worker who keeps them: no NI and no PAYE; the worker tells HMRC and the tax is usually collected through their tax code. (2) Tips the employer allocates, directly or indirectly: PAYE plus employee NI (8% main rate) and employer NI (15%). (3) Tips shared by an independent troncmaster with no employer involvement in the allocation: PAYE through the tronc's own scheme, and no NI at all.
What is a tronc and how does it work?
A tronc is a separate arrangement for pooling and sharing tips, run by a troncmaster who is not the employer (E24). The employer must tell HMRC who the troncmaster is so a separate PAYE scheme can be set up in the troncmaster's name; the troncmaster is personally responsible for operating PAYE on tronc payments and can use the employer's payroll software as long as the records are kept separate. If the employer, a partner or a company official (such as a director) acts as troncmaster, payments go through the employer's own payroll.
When are tronc payments free of National Insurance?
Under the Social Security (Contributions) Regulations 2001, Sch 3 Part 10 para 5, a payment of or in respect of a gratuity is disregarded for NI if it is not paid by the employer and does not come from money first paid to the employer, or if the employer does not directly or indirectly allocate it. HMRC's E24 examples: an employer who decides who gets what, or whose instructions the troncmaster follows, makes the payments liable; a staff committee or troncmaster deciding independently does not. An employer that only appointed the troncmaster is not, by that alone, allocating.
How is a service charge treated?
A mandatory service charge is not a tip. If it is paid out to staff, NI is always due, however it is shared and even if it goes through a tronc (E24, GOV.UK Tips at work). A genuinely discretionary service charge is treated like other tips. For VAT, tips freely given are outside the scope of VAT, and a service charge the customer has a genuine option not to pay is not consideration for the supply (E24 section 4).
What does the Employment (Allocation of Tips) Act 2023 require?
From 1 October 2024 employers must ensure all qualifying tips, gratuities and service charges are allocated fairly between workers at the place of business and paid without deductions other than those required by law (ERA 1996 ss.27C-27D, 27F). Allocation and payment must happen by the end of the month after the month the customer paid (s.27G). Where tips are more than occasional, the employer needs a written tipping policy available to workers (s.27I) and must keep records for three years (s.27J). Fairness is judged against the statutory code of practice.
Can a worker see how tips were shared?
Yes. A worker can make a written request for the records of tips at a place of business they worked at, for a period of one or more whole months starting no more than three years before the request. The employer must reply within four weeks, and a worker can make only one request in any three-month period (ERA 1996 s.27J).
What can a worker do if tips are not shared fairly?
A worker can complain to an employment tribunal within 12 months of the failure (or of the last in a series). The tribunal can order the employer to revise the allocation or pay workers, and award compensation of up to £5,366 for financial loss (ERA 1996 ss.27K-27M). Complaints about the written policy or records must be brought within six months of the failure where it happened on or after 1 October 2026 (three months for an earlier failure), also with compensation of up to £5,366 (ss.27N-27O; SI 2026/954). Acas can help with questions (GOV.UK Tips at work).
Do agency workers get a share of tips?
Yes. An eligible agency worker who works at the principal's place of business is treated as the principal's worker for the tipping rules (ERA 1996 s.27H). Their share can be paid to the agency within the same deadline, and the agency must pass it on by the end of the following month without unauthorised deductions. Genuinely self-employed contractors running their own business are excluded.
How are tips taxed for self-employed workers?
For someone who is genuinely self-employed, tips received in the course of the trade are part of trading income and go on the Self Assessment return, so Income Tax and Class 4 NI apply to profits in the usual way. Keep a record of tips alongside other takings. Whether someone is self-employed or a worker depends on the facts of the arrangement, not on what it is called.
Is the tipping code of practice changing?
The Employment Rights Act 2025 requires employers to consult workers when developing or revising their written tipping policy, and the Department for Business and Trade published a revised draft code of practice in 2026. It says a public consultation will follow and that, for now, employers should continue to follow the existing code of practice.