Tronc and the Tips Act 2023: a UK restaurant guide

Since 1 October 2024, a UK employer must pass 100% of qualifying tips, gratuities and service charges to staff, share them fairly, pay them out by the end of the month after the customer paid, keep a written tipping policy and keep records for three years. A tronc is the separate arrangement some venues use to share tips through an independent troncmaster, and it changes how PAYE and National Insurance work. This guide covers what the law requires, how a tronc is taxed, a policy you can copy, and the changes expected from late 2026. You can run a split with our free tronc and tip split calculator.

What the Tips Act requires, and what is out of scope

The Employment (Allocation of Tips) Act 2023 inserted a new Part 2B into the Employment Rights Act 1996. It came into force on 1 October 2024 and applies in England, Wales and Scotland. The statutory Code of Practice explains how a tribunal will read it. In short, you must:

"Workers" means employees and other people who work for you personally, including zero-hours staff and agency workers. Self-employed contractors are not covered. Tips are also shared per place of business: the government's non-statutory guidance says you cannot pool tips across different branches.

The method of payment does not decide whether a tip is in scope. What matters is control. A tip is a qualifying tip if you receive it (for example a card tip that lands in your bank account) or if you control or significantly influence how it is shared. The Code gives two clear exclusions:

• A cash tip that a worker receives and keeps, with no involvement from you, is out of scope.
• Digital tipping where the customer tips a staff member directly through an app, bypassing the business, is also out of scope.

If you tell staff how to split the cash in the jar, or collect it and hand it out at the end of the shift, you have taken control and those tips are in scope.

The payment deadline, with an example

Section 27G sets the deadline, and the Code gives the example: a tip left on 23 June must be distributed by 31 July at the latest. The deadline runs from the month the customer paid, not the month you banked the money.

Most restaurants pay tips through payroll, so the practical rule is that tips for one month must be in the next month's pay run. If your payroll closes early and you miss the cut-off for a few late-month tips, they still have to be paid by the end of the following month. Check this when you set your payroll dates.

Tronc, PAYE and National Insurance

Tax is separate from the Tips Act. The Act "does not change how these payments should be assessed for tax and National Insurance contributions", as HMRC's guidance on tips, gratuities, service charges and troncs (E24) puts it. These are the rules that matter to a restaurant:

• Tips you pay through your payroll. PAYE applies. If you decide who gets what, both employer and employee National Insurance are due too.
• Cash tips staff keep with no employer involvement. No PAYE and no National Insurance. Staff declare the income to HMRC themselves.
• An independent tronc. A tronc is a pooling arrangement run by a troncmaster who is not the employer. If the troncmaster decides who gets what, independently of you, no National Insurance is due on what the tronc pays out. PAYE still is, and the troncmaster must run a PAYE scheme that is separate from yours. You must tell HMRC who the troncmaster is.
• A compulsory service charge. If a mandatory service charge is paid out to staff, National Insurance is always due, however it is shared. HMRC says this applies "regardless of how the money is shared out".
• Tips and minimum wage. Tips and service charges do not count towards National Minimum Wage pay.

The independence test is strict. HMRC's guidance gives examples: if you require the troncmaster to use a points system you devised, you are still treated as allocating the tips, and National Insurance is due. If a staff committee or an elected troncmaster picks the system freely, it is not. Under the Tips Act you also stay responsible for the tronc being fair, so if you learn it is operating unfairly you must act.

Employer National Insurance is 15% above £5,000 a year per employee in 2026/27, so it is worth real money. On £2,350 of monthly tips paid through payroll with employer allocation, the cost is up to £352.50 a month, before any Employment Allowance. That is the saving a genuine independent tronc can produce, and it is also why HMRC checks them. Get an accountant to set one up.

A worked tip split

Say a restaurant collects £2,350 in card tips in March. The written policy shares the pool by hours worked, weighted by role: server and bar 1.0 point per hour, runner and chef 0.8, kitchen porter 0.6. Those weights are the employer's choice, and they must be stated in the policy.

The value per point is the pool divided by total points: £2,350 ÷ 470 = £5. The shares must be paid by 30 April. If you paid the tips on 15 April, record the date. The tip calculator does the same calculation by hours or by points.

The Code lists factors you may use: role, basic pay, hours worked, performance, seniority, length of service and customer intention. Watch for indirect discrimination, for example a formula that gives a smaller share to a group that is mostly one gender or age band.

Your written tipping policy and records

Section 27I says the policy must state whether you require or encourage customers to tip, and how you make sure tips are dealt with lawfully, including how they are allocated between workers. Make it available to everyone, including agency staff, in plain language. The government's non-statutory guidance includes a policy template. Here is a version you can adapt:

Tips, gratuities and service charges policy for [venue name]

Scope. This policy covers all tips, gratuities and service charges paid by customers at [venue name], whether by card, contactless, QR code or added to the bill.

Encouraging tips. [We encourage customers to leave a tip / We add a [12.5]% service charge to tables of [8] or more. The charge is [optional and shown as such / compulsory and shown on the menu].]

Cash tips. Cash tips left directly with a team member belong to that team member. We do not collect or direct them.

Card tips and service charges. We pay 100% of tips and service charges received by card to workers. We make no deductions for card fees or administration, other than tax and National Insurance the law requires.

How we share them. Tips are pooled each [calendar month] and shared between all workers who worked in that period, in proportion to [hours worked, weighted by role: front of house 1.0, runners and chefs 0.8, kitchen porters 0.6]. Agency workers and zero-hours workers share on the same basis.

When you are paid. Tips are paid through payroll in the month after the customer paid, and always by the end of that month.

Your records. You can ask [name or role] in writing, once in any three-month period, for a record of the tips we received and the amount allocated to you for any period of at least a month that you worked here. We reply within four weeks.

Questions. If you think your share is wrong, speak to [name or role]. If it is not resolved, you can follow our grievance procedure or contact Acas.

Review. We review this policy at least every [year / three years] and tell all workers about any change.

For records, the Act requires the total tips paid at the place of business and the amount allocated to workers (or passed to an independent tronc operator) for every tip. A worker can ask in writing for the records for a period of at least a month, going back up to three years, covering months they worked, and you must respond within four weeks. A worker can make one such request in any three-month period. Under the Code, the worker is told the total tips and their own share, not other people's pay.

What happens if you get it wrong

A worker can complain to an employment tribunal about unfair allocation or late payment, within 12 months of the failure. If the tribunal agrees, it must make a declaration and can order you to redo the allocation. It can also order compensation of up to £5,000 for the worker's financial loss, under section 27M, and the Code says it can also make a non-binding recommendation about a past allocation. Complaints about a missing policy or records now have a six-month time limit (it was three months before 1 October 2026) and the same £5,000 compensation cap. Poor records make these cases hard to defend.

What changes next: the Employment Rights Act 2025

Section 14 of the Employment Rights Act 2025 adds new duties to the policy rules. You must consult workers before producing the first version of your policy, and again as part of every review, and you must review the policy at least once every three years. The section also requires you to make a summary of the views expressed, in anonymised form, available to all workers at the place of business, and the consultation on the revised Code sets out how the government expects this to work.

Where this stands on 5 October 2026:

• The duties are not yet in force. The government's implementation timeline, last updated on 25 September 2026, lists "strengthening tipping law" under measures that will take effect by the end of 2026.
• A public consultation on the draft revised Code ran from 19 August to 29 September 2026. A final Code must then be laid before Parliament and approved.
• The government says the new requirements and the revised Code are expected to take effect in late 2026, subject to that approval, and it will confirm the exact arrangements. For now, it says to keep following the existing Code.
• The draft Code says employers should not rebrand a service charge to avoid the rules, discourages fixed or guaranteed tip amounts for particular workers, and encourages (but does not require) sharing the policy with customers.

Dates in this area have already moved once, so recheck the timeline before you act. A practical step now is to start asking your team what they think of the current method, and write down the answers.

Compliance checklist

1. Decide your method: payroll distribution, or an independent tronc set up with your accountant.
2. Write the policy using the template above, and give it to every worker, agency staff included.
3. Pay out 100% of card tips and service charges, with no card fee deductions.
4. Put tips through the pay run for the month after the customer paid, and not later.
5. Keep records of every tip and every allocation for three years.
6. Tell HMRC who the troncmaster is, if you use one, and keep your PAYE separate from theirs.
7. Check your formula for indirect discrimination once a year.
8. Consult staff on the policy, keep notes, and diarise a review within three years.

If your point-of-sale system records each card tip against the shift and the server, the monthly report is much easier to build. TablePort's POS reconciles tips and the tip pool at the close-out screen, and its Staff add-on records clock-in and clock-out hours. Check that the reports you export hold what your written policy and the three-year record rule require. A related guide covers service charge law, and the rota template helps you track hours.

This guide is general information, not legal or tax advice, so speak to a solicitor or accountant about your specific situation.