Are tips taxable? How do you report tips to HMRC? Is your business ready for the Employment (Allocation of Tips) Act?
In the UK, tips are considered income and are subject to income tax.
When tips are given directly to workers, as they are through Take it Personally, HMRC’s guidance is that:
This is because our platform lets guests send tips straight to workers, without the tips passing through the hotel. Whether this treatment applies depends on the arrangement meeting HMRC’s conditions (see HMRC’s guidance for the details, and consult your own adviser about your situation).
Income from tips is declared to HMRC by the workers themselves. While Take it Personally doesn’t provide tax advice, here’s how and when workers report their tips, with links to the right HMRC resources.
If a worker’s tips for the tax year are below the level that requires a Self Assessment return, they can usually report them to HMRC by phone, post, or online. HMRC then adjusts the worker’s tax code so income tax is collected through their future pay, with no extra paperwork for the worker or the employer.
No National Insurance is due, because the tips were received directly from guests without the employer’s involvement.
If a worker’s tips for the tax year are high enough to require Self Assessment, they report them by completing a Self Assessment tax return.
No National Insurance is due on tips received directly from guests. The worker can file their Self Assessment return online or on paper.
This law requires employers to pass on all qualifying tips to staff fairly and transparently, with no deductions. It’s designed to make sure hospitality workers receive the tips they’ve earned. Take it Personally is built to fit alongside it.
With Take it Personally, guests send tips directly to the worker they want to thank.
Take it Personally pays workers promptly and within the timing the law expects.
Take it Personally makes sure each tip is paid out in full to the worker it was meant for, with no deductions by the employer.
Take it Personally provides a ready-to-use template for the Take it Personally part of your tipping policy.
The Act requires records of tips and their distribution to be kept for three years. Take it Personally keeps every transaction easily accessible.
You can add any staff member to your tip recipient list with Take it Personally, whether they’re an employee or an agency worker.
With Take it Personally, guests send tips to the intended worker for the service they received at a specific location, even if that worker is part of several teams across several locations.
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