UK tips law for hospitality: the Allocation of Tips Act, the code of practice and tronc rules

Tips used to be governed mostly by custom. Since 1 October 2024 they've been governed by law, and in hospitality that law affects almost every venue that takes card tips or adds a service charge. This guide sets out what the law requires as of October 2026, how a tronc fits in, and what's changing next.

The rules below apply in England, Scotland and Wales. The Employment (Allocation of Tips) Act 2023 doesn't extend to Northern Ireland.

The law in one paragraph

The Employment (Allocation of Tips) Act 2023 added new sections to the Employment Rights Act 1996. If you, as the employer, receive or control tips, gratuities or service charges ("qualifying tips"), you must pass all of them to workers without deductions (except in very limited cases, such as income tax), allocate them fairly, pay them by the end of the month after the customer paid, keep records for three years, and, if tips are paid at your venue more than occasionally, have a written tipping policy. A statutory code of practice explains what "fair" means, and employment tribunals must take it into account.

What counts as a qualifying tip

The test is whether the employer receives the tips or has control or significant influence over how they're shared. Telling staff how to divide the cash jar counts as control.

The five duties

1. Pass on 100%

All qualifying tips go to workers. No admin fee, no "house share", no deductions except in very limited cases such as income tax.

2. Allocate fairly

The code doesn't require equal shares, but it does require a fair system based on clear and objective factors stated in your policy. The code lists examples of factors you can use:

• the type of role (front of house or back of house)
• basic pay and how workers are engaged
• hours worked in the tip period
• individual or team performance
• seniority or level of responsibility
• length of service
• what the customer intended

All workers who serve customers should be considered, including agency workers. Whatever you choose, it mustn't discriminate, including indirectly. The code says employers should consult workers to seek broad agreement that the system is fair, and that agreement must be genuine.

3. Pay on time

Tips must be paid by the end of the month following the month the customer paid. A tip left on 23 June must reach the worker by 31 July.

4. Keep records

Keep a record of all qualifying tips received at the venue and how much was allocated to each worker, for three years from the date each tip was paid.

A worker can ask in writing for the record. They can make one request every three months, covering up to three years (only months they worked for you), and you must respond within four weeks. You give them the total qualifying tips for the venue in that period and their own allocation, not other people's.

5. Have a written policy

If tips are paid at your venue on more than an occasional and exceptional basis, you need a written tipping policy. It should:

• explain how tips are accepted, allocated and distributed
• state the factors you use to allocate them
• be in plain language
• be available to all workers equally, for example by email, on a staff portal, at induction or on the break-room wall, with an accessible format for disabled workers on request
• reach agency workers, from you or from their agency

When you change it, all staff should see the update from the day it takes effect. Publishing it to customers is optional.

A worked example: a 50-cover bistro

An independent bistro receives £2,400 in card tips and discretionary service charges in October. Its written policy, agreed with staff, allocates by hours worked, with front of house weighted at 1.0 and kitchen at 0.8 (because front-of-house staff earn a lower basic rate). The weightings are the bistro's own choice and are just an illustration.

£2,400 ÷ 500 points = £4.80 a point. Everything is paid through payroll by 30 November, and the bistro keeps the tip record and the calculation for three years.

Use actual hours worked, from timesheets or payroll. A published rota tells you who was scheduled, but people swap, go home early and pick up extra shifts.

How a tronc works

A tronc is a separate arrangement for pooling and sharing out tips, run by a troncmaster. The code says the troncmaster can be a member of staff appointed by the employer, an external payroll or accountancy firm, or a member of staff elected by the workers, and that care is needed to keep it independent.

Key points:

• The employer is still responsible for fairness. If you reasonably believe the tronc is run independently and fairly, you're regarded as complying. If you find out it isn't, you have to act, for example by instructing changes, replacing the troncmaster or ending the arrangement.
• Tax: tips paid through a tronc are taxable. You must tell HMRC who the troncmaster is so a separate tronc PAYE scheme can be set up, and the troncmaster operates PAYE on the payments.
• National Insurance: HMRC's E24 guidance says no National Insurance is due on tronc payments where the troncmaster allocates money that wasn't paid to the employer, or where the employer doesn't determine, directly or indirectly, how the tips are allocated. If the employer decides the allocation, the employer pays tax and NI.
• Mandatory service charges: if you impose a mandatory service charge and pay it out to employees, HMRC says National Insurance is always due, however it's shared.
• Top-ups: if you guarantee staff a minimum tip amount and top it up, HMRC treats the top-up as pay, not a tip.

HMRC says the 2024 tips law didn't change how tips are treated for tax and National Insurance. A good payroll provider or accountant should set this up with you.

Tips and the minimum wage

Tips don't count towards the National Minimum Wage. Staff must get at least the minimum rate for their age before any tips. Our guide to labour cost percentage explains how to treat tips when you work out your wage costs. From April 2026 that's £12.71 an hour at 21 and over, £10.85 for 18 to 20-year-olds and £8.00 for under-18s and apprentices.

If something goes wrong

The code expects you to have a fair process for queries and complaints about tips, in line with the Acas code on disciplinary and grievance procedures, and to treat agency workers' queries the same as anyone else's. Workers can take unresolved complaints to an employment tribunal, which can order a revised allocation and compensation of up to £5,000.

What's changing

• Consulting workers on your policy. The Employment Rights Act 2025 makes it a requirement for employers to consult workers at their place of business when developing or revising a written tipping policy.
• Timing: the government's timeline (last updated 22 October 2026) schedules the strengthened tipping law for 1 January 2027.
• A revised code. A revised code of practice was laid before Parliament in 2026, then withdrawn for a fresh public consultation, which closed on 29 September 2026. Until the revised code is in force, the October 2024 code continues to apply.

If you haven't asked staff for their views on your current policy, doing so now gets you ahead of the 2027 change.

Tipping policy checklist

• All qualifying tips (card, service charge, controlled cash) passed on with no deductions except tax
• Allocation factors written down, clear and objective, and checked for indirect discrimination
• Agency workers included
• Tips paid by the end of the following month
• Written policy in plain language, available to every worker, and updated copies shared on the day changes take effect
• Staff consulted on the policy (required from 2027; good practice now)
• Tip records kept for three years
• Process to answer written record requests within four weeks
• Tronc (if used) independent, troncmaster registered with HMRC, PAYE operated
• Minimum wage paid before tips

Where ShiftComplete fits

ShiftComplete doesn't handle tips, troncs or payroll. Two things it does help with: team announcements, so your tipping policy and any updates reach every staff member at the same time rather than getting lost in a group chat, and a published rota that gives you a clear starting point for who was working when, before you check actual hours against timesheets.

This guide summarises the law and official guidance; it isn't legal or tax advice, so for your specific arrangements speak to Acas, HMRC or a qualified adviser.