Tips and tax
Who reports the tax and whether you pay National Insurance depends on:
- how the customer paid the tip
- how tips are managed at your workplace
Tips paid directly to you
If you keep the tips you get directly from customers you must report them to HM Revenue and Customs (HMRC) yourself.
You must report tips in one of the following ways:
- in a Self Assessment tax return if you already fill one in
- through your personal tax account online
- by calling HMRC
HMRC will change your tax code if needed. Your employer will then deduct any tax you owe on tips when you get paid. You will not need to pay National Insurance.
Tips paid through work
You do not have to report tips:
- passed on by your employer, for example, discretionary tips customers added to their bill payments
- paid through a separate system for managing and sharing out tips at your workplace (known as a ‘tronc’)
Any Income Tax you owe on these tips will be deducted when you get paid.
Whether you have to pay National Insurance depends on how much your employer is involved in deciding how the tips are shared out.
If you have to pay National Insurance your employer will deduct it when you get paid.
Read more guidance on tips, tax and how troncs work.
These are added to the bill before it’s given to the customer.
If the charge is compulsory, it’s not a tip so if your employer gives it to you, it’s treated in the same way as your wages.
If it’s voluntary, you pay tax and National Insurance in the same way as for tips.
These are part of your pay and you’ll pay tax and National Insurance on them. Your employer will deduct these from your wages before you get them.
Cash in hand wage payments
It’s illegal for your employer to pay you your wages ‘cash in hand’ without deducting tax and National Insurance contributions.
You risk losing your employment rights if you accept cash in hand payments, and may have to pay the tax and National Insurance contributions yourself.
Report your employer if you think they are not paying tax or National Insurance contributions on your wages.