Law changes on tips for waiters

Restaurant owners are now banned from deducting money from tips earned by waiters and other staff.

Tips can be paid to employees using the following methods:

Cash received direct from a customer

This is an allowable method of receiving tips, however the person receiving the tip is responsible for declaring and paying tax on the amount that is received.

Part of pay packet

If this is the case, it is the employer’s duty to declare the tips in relation to tax. This also applies if any tips are received via card payment and distributed alongside wages. (Please note- any tips given alongside wages should be on top of the basic hours due and cannot form part of the Minimum Wage calculation).


This is where all the tips are pooled and distributed between staff.

The tronc should be managed by a member of staff who is independent from the employer. This person will be responsible for passing these funds on to the workers and paying tax on the amount received.

HMRC offer a ‘code of best practice’ which gives advice on the best way to handle tips – please see the link for more information:

If you would like to discuss any of this further then please contact us on 0116 2423400

Author: Jessica Cooper MAAT, Accounts & Tax

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