Do you get Taxed on Tips in the UK?

Working in the service industry in the UK? Make sure you know the ins and outs when it comes to getting taxed on your tips. After all, tips make quite the contribution to your salary. So, are tips taxable?

Do you pay income tax and National Insurance (NI) contributions on tips?

It will depend on how the tips are given and who decides how it is shared out. Is it given to you directly by cash or pooled together in a tronc? The answer will dictate if tax and NI are applicable.

When do you pay income tax on tips?

If a customer pays it to you directly in cash, income tax applies but not NI.

As self-employed, what do you need to do when you earn tips?

You need to include all the tips you receive in your Self Assessment tax return.

Can you skip paying tax on tips if you don’t file a tax return?

Failure to file a tax return will prompt HMRC to make an estimate based on the information you and your employer provided. The agency will then provide your employer with a tax code so they can collect through Pay As You Earn (PAYE).

Do you pay tax on tips included in cheque or card payments?

Yes, if…

  • The tip is paid directly to you by your employer.
  • The tips are pooled in a tronc. The troncmaster, or the person looking after the tronc, will ensure everyone involved will pay income tax.

The employer must inform HMRC about the tronc and the identity of the troncmaster.

When do you pay income tax and NI on tips?

If the decision of how the tips are shared is made by the employer, tax and NI must be paid through PAYE.

Think you’ve been overtaxed? Find out if you’re owed some tax back here

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