Answers · UK 2025/26
Are tips taxable in the UK in 2026?
Yes -- all tips and gratuities are taxable income in the UK. The Workers (Allocation of Tips) Act 2023 (in force from October 2024) requires employers to pass all tips to workers in full without deductions. Tips via tronc schemes are taxable through PAYE. Cash tips must be declared on Self Assessment.
Full answer
Tips are fully taxable in the UK as employment income or self-employment income. The law on how employers handle tips also changed significantly from October 2024. Workers (Allocation of Tips) Act 2023: - In force from 1 October 2024. - Employers must pass 100% of all tips, gratuities, and service charges to workers without making any deductions. - Employers cannot use tips to make up national minimum or living wage. - Employers must have a written tips policy and distribute tips fairly, keeping records for 3 years. - Workers can request information about tipping arrangements and complain to an Employment Tribunal if tips are withheld. How tips are taxed: Tronc schemes: - A tronc is an independent arrangement (usually operated by a troncmaster separate from the employer) for distributing tips among staff. - Tips paid through a qualifying tronc are taxed via PAYE -- income tax is deducted but no NI is due. Tips paid directly by employer (via payroll): - Taxed through PAYE as earnings. Income tax and NI both apply. Cash tips received directly from customers: - The employee must declare cash tips on a Self Assessment return. - HMRC has increased enforcement of undeclared tips, particularly in hospitality. Card/contactless tips: - Treated the same as cash from a tax perspective. The employer or tronc distributes them, and PAYE applies. VAT on tips: - Tips are not subject to VAT if the customer makes a genuinely voluntary decision. However, a mandatory service charge included in the bill is subject to VAT. National Minimum Wage: - Tips cannot count toward NMW calculations since April 2009.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.