{"id":1355,"date":"2024-12-12T11:28:26","date_gmt":"2024-12-12T11:28:26","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/\/knowledge\/staff\/businesses-to-be-banned-from-keeping-staff-tips\/"},"modified":"2026-02-17T14:49:51","modified_gmt":"2026-02-17T14:49:51","slug":"staff-tips-rules-for-small-businesses","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/staff-tips-rules-for-small-businesses\/","title":{"rendered":"Staff tips \u2013 rules for small businesses in 2026"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">If you run a hospitality business, hairdressers, or anywhere else that gets tips from customers, it\u2019s your responsibility to make sure staff get everything they\u2019re owed.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/www.gov.uk\/government\/publications\/distributing-tips-fairly-statutory-code-of-practice\" target=\"_blank\" rel=\"noreferrer noopener\" rel=\"noopener noreferrer\" target=\"_blank\">The Employment (Allocation of Tips) Act 2023<\/a>, otherwise known as the Tipping Act, has made it mandatory for employers to pass on all tips to employees without any deductions.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here&#8217;s everything you need to know dividing tips, troncs, and National Insurance if you&#8217;re an employer.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-employment-allocation-of-tips-act-2023-nbsp\">What is the Employment (Allocation of Tips) Act 2023?&nbsp;<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Also known as the Tipping Act, this law makes sure all tips and service charges go to hospitality staff or any employees who have been given tips by customers.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This issue was first consulted on in 2016 after media highlighted malpractice and unfair distribution of tips \u2013 while the Tipping Act first came into effect on 1 October 2024.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While cash tips were already protected by law, this newer legislation covers card payments in an increasingly cashless society.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many hospitality workers earn the <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/what-is-the-national-minimum-wage\/\" data-type=\"knowledge\" data-id=\"1588\">national minimum wage or living wage<\/a> and rely on the additional boost from tips.<\/p>\n\n\n\n<div class=\"wp-block-group has-azure-300-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-69910985 wp-block-group-is-layout-constrained\" style=\"border-radius:10px;padding-top:var(--wp--preset--spacing--20);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--50);padding-left:var(--wp--preset--spacing--90)\">\n<h2 class=\"wp-block-heading\" id=\"h-employment-rights-act-tipping-updates-for-2026\"><strong>Employment Rights Act \u2013 tipping updates for 2026<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The government has u-turned on their decision to give workers control over how tips are allocated, which was initially included in the <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/employment-rights-bill\/\" type=\"knowledge\" id=\"26327\" data-type=\"knowledge\" data-id=\"26327\" >Employment Rights Act<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Another consultation has been launched by the government, which closes on 1 April 2026, hopes to identify what employers see as the main challenges of creating a tipping policy, as well as views from workers on how tips are distributed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">New legal requirements around tipping laws will come into effect in October 2026.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-do-employers-now-need-to-do-with-tips\">What do employers now need to do with tips?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To comply with UK law surrounding tips, employers must:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">pass on all tips to workers without any deductions<\/li>\n\n\n\n<li class=\"wp-block-list-item\">pay these tips to employees within one calendar month<\/li>\n\n\n\n<li class=\"wp-block-list-item\">keep a record of all tips \u2013 workers will have the right to request to see this as it will allow them to bring credible claims to an Employment Tribunal<\/li>\n\n\n\n<li class=\"wp-block-list-item\">create a written policy on tips \u2013 this will let staff know whether you encourage tips, and how they\u2019re managed and distributed<\/li>\n<\/ul>\n\n\n\n<div id=\"nba-body-001\">\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\">You\u2019re also not allowed to alter an employee\u2019s salary or hourly rate \u2013 earnings from tipping won\u2019t count towards earning the national minimum wage. Tips must be allocated fairly between all workers, including those on zero-hour contracts \u2013 though the Employment Rights Bill will be scrapping these types of contracts entirely (which have now been outlawed by the Employment Rights Act).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Under the legislation, if an employer breaks the rules they could be taken to an employment tribunal. This could mean compensation and fines, so it\u2019s important that you\u2019re on top of what you need to do to comply with the laws.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-divide-tips\"><strong>How to divide tips<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Employers don\u2019t necessarily have to distribute tips <strong>evenly<\/strong> between all workers. However, they do need to be distributed fairly and you need to create a written policy explaining how you do this.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Some of the things you\u2019ll need to consider when creating your policy for distributing tips are:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">differences in role (e.g. front of house workers may be more deserving of tips than those working behind the scenes)<\/li>\n\n\n\n<li class=\"wp-block-list-item\">performance at an individual or team level<\/li>\n\n\n\n<li class=\"wp-block-list-item\">length of time working with the employer or level of seniority<\/li>\n\n\n\n<li class=\"wp-block-list-item\">customer intention (e.g. if a customer wants to tip a specific employee who served them)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">There are several collection and distribution methods to choose from. For example, if an employee is tipped \u00a310, you could:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">let the worker to keep the entire \u00a310 as their tip<\/li>\n\n\n\n<li class=\"wp-block-list-item\">add the \u00a310 to a staff box, to be informally shared with the workforce<\/li>\n\n\n\n<li class=\"wp-block-list-item\">add the \u00a310 to a tronc system, to be formally shared with the workforce (this is particularly useful if you\u2019re dealing with card tips)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">However you choose to deal with tips, you\u2019ll need to make sure you communicate this properly to employees using your tips policy. This could be done during induction \u2013\u00a0 you could provide a physical copy at this time and also display it on staff notice boards.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s a good idea to review and update this policy regularly. As employment laws evolve and your business practices change, keeping your policy current makes sure there\u2019s ongoing compliance and transparency with your team.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-tronc-and-how-can-it-help-your-business\">What is a tronc \u2013 and how can it help your business?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A tronc is a system sometimes used to pay employees their share of tips and service charges in the hospitality sector. A \u2018troncmaster\u2019 will be in charge of deciding how the money is divided. This can be a member of staff other than the owner (or anyone else with hiring and firing authority), or even an external accountancy firm or payroll business.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Using a tronc can help your business manage your tax implications when it comes to tips and gratuities. It\u2019s helpful as a tronc on a payroll can mean the tips are excluded from <a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/how-to-pay-national-insurance-when-self-employed\/\" data-type=\"knowledge\" data-id=\"1440\">National Insurance contributions<\/a> (NICs), whereas if you manage the sharing out of tips yourself, you\u2019ll be responsible for NICs as well as income tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-are-tips-subject-to-tax-and-national-insurance\">Are tips subject to tax and National Insurance?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">All tips are subject to income tax, but whether they\u2019re also subject to National Insurance contributions depends on how they are handled.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><strong>tips given directly to employees by customers<\/strong> (for example, cash tips not processed through the employer) must be declared by employees themselves. They\u2019re also responsible for reporting these earnings to HMRC and paying both income tax and NICs<\/li>\n\n\n\n<li class=\"wp-block-list-item\"><strong>tips distributed through payroll<\/strong> are subject to both income tax and NICs, just like regular wages<\/li>\n\n\n\n<li class=\"wp-block-list-item\"><strong>tips shared via a tronc system<\/strong> (managed independently by a troncmaster, not the employer) are subject to income tax but aren\u2019t subject to NICs (only if the tronc operates independently of the employer)<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">For all types of tips, accurate records must be kept to ensure compliance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tips-and-employment-claims-nbsp\">Tips and employment claims&nbsp;<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Tipping Act adds \u201cqualifying tips, gratuities and service charges\u201d to the definition of wages. This means an employer can be open to a claim for unlawful deductions from wages if they don\u2019t handle tip distribution fairly.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Employees can also make a claim if they believe that employers haven\u2019t been keeping correct records or don\u2019t have a clear enough tipping policy.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Guides for hospitality businesses<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/marketing\/how-to-get-google-reviews-for-your-business\/\" data-type=\"knowledge\" data-id=\"998\">How to get Google reviews for your business \u2013 7 practical tips<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/marketing\/what-is-good-customer-service\/\" data-type=\"knowledge\" data-id=\"990\">What is good customer service?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/hospitality\/food-labelling-regulations-for-small-businesses\/\" data-type=\"knowledge\" data-id=\"870\">Guide to allergens, food labelling and safety<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/hospitality\/top-online-restaurant-reservation-systems\/\" data-type=\"knowledge\" data-id=\"1008\">9 of the best restaurant reservation systems<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"https:\/\/www.simplybusiness.co.uk\/business-insurance\/faq\/what-type-of-business-insurance-do-i-need\/\">What type of business insurance do I need?<\/a><\/li>\n<\/ul>\n\n\n\n<div id=\"nba-upsell-001\" class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-94e519ba wp-block-group-is-layout-constrained\" style=\"padding-top:var(--wp--preset--spacing--80);padding-right:var(--wp--preset--spacing--40);padding-bottom:var(--wp--preset--spacing--80);padding-left:var(--wp--preset--spacing--40)\">\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"lookingforselfemployedinsurance\">Looking to insure your restaurant?<\/h3>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\">You can build a tailored <a href=\"\/business-insurance\/restaurant-insurance\/\">restaurant insurance<\/a> policy choosing from a range of expert cover options, starting with <a href=\"\/business-insurance\/public-liability-insurance\/\">public liability insurance<\/a>. Run a quick quote to get started.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/quote.simplybusiness.co.uk\/business\">Start your quote<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n<div id=\"nba-body-end\">\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Everything you need to know dividing tips, troncs, and National Insurance.<\/p>\n","protected":false},"author":3,"featured_media":3371,"comment_status":"open","ping_status":"closed","template":"","meta":{"sb_hreflang":"","sb_hreflang_url":"","disable_breadcrumbs":false,"sb_breadcrumbs":[],"sb_reviewed_by":"rosanna-parrish","sb_review_date":"2026-02-11T15:55:45","sb_enable_content_gating":true,"footnotes":""},"categories":[342],"hidden-category":[],"coauthors":[25],"class_list":["post-1355","knowledge","type-knowledge","status-publish","has-post-thumbnail","hentry","category-staff"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Staff tips \u2013 rules for small businesses in 2026<\/title>\n<meta name=\"description\" content=\"We look at the latest tips and gratuity distribution rules for UK businesses in 2026 \u2013 following the Employment Rights Act.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/staff-tips-rules-for-small-businesses\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Staff tips \u2013 rules for small businesses in 2026\" \/>\n<meta property=\"og:description\" content=\"Everything you need to know dividing tips, troncs, and National Insurance.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/staff-tips-rules-for-small-businesses\/\" \/>\n<meta property=\"og:site_name\" content=\"Simply Business UK\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/simplybusiness\" \/>\n<meta property=\"article:modified_time\" content=\"2026-02-17T14:49:51+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.simplybusiness.co.uk\/wp-content\/uploads\/sites\/3\/2024\/06\/businesses-to-be-banned-from-keeping-staff-tips.jpg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Staff tips \u2013 rules for small businesses in 2026\" \/>\n<meta name=\"twitter:site\" content=\"@simplybusiness\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"6 minutes\" \/>\n\t<meta name=\"twitter:label2\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data2\" content=\"Catriona Fuller\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/staff-tips-rules-for-small-businesses\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.simplybusiness.co.uk\/knowledge\/staff\/staff-tips-rules-for-small-businesses\/\"},\"author\":{\"@type\":\"Person\",\"name\":\"Catriona Fuller\",\"description\":\"Catriona Fuller is a content and marketing professional with 12 years\u2019 experience across the financial services, higher education, and insurance sectors. 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