Taxes and Allocation of Tips in the UK

Are tips taxable?   How do you report tips to HMRC? Is your business compliant with new legislation? 

Taxes on Tips

In the UK, tips are considered income and are subject to income taxes.

However, if tips are received through the Take it Personally platform:

  • no National Insurance Contributions are due
  • no PAYE is applied
  • fully compliant with HMRC regulations

This is because our platform enables guests to directly send tips to workers, without hotel involvement. 

If customers give or pay tips directly to employees or leave them on the table and individual employees keep them without any involvement from the employer, then PAYE does not apply. Tax will be due on these amounts, but no National Insurance contributions are due.
HMRC

Reporting cashless tips

Income from tips is declared to HMRC by the workers.

Learn how and when report your tips. While Take it Personally doesn’t provide tax advice,  we’re here to guide you to relevant resources.

Less than £2500 in tips

If you earned less than £2500 in tips during a tax year, self-reporting to HMRC is necessary.

You can inform HMRC about your earned tips by phone, post or other methods. This ensures that income tax on up to £2500 in tips from the previous tax year is automatically deducted through your future payslips via PAYE, without any hassle for you or your employer. 

Remember, no National Insurance contributions are due, because the tips were received directly from guests, without your employer’s involvement.

More than £2500 in tips

If you earned more than £2500 in tips during a tax year, you’ll need to fill out and submit a Self-Assessment Form.  Learn more here: gov.uk

Remember, no National Insurance contributions are due, because the tips were received directly from guests, without your employer’s involvement.

You can file your Self Assessment tax return online or send a paper form via post.

Get your business ready for the

UK Employment (Allocation of Tips) Bill

Set to be Implemented in 2024

What is the Employment
(Allocation of Tips) Bill?

This new law ensures that all tips are distributed fully and fairly to the staff. It helps workers in hospitality jobs feel sure that they will get all the tips they deserve for their hard work.

We address all new legal requirements

Tips must be passed to employees in a fair and transparent manner

Agency workers are entitled to receive tips on the same terms as regular employees

Customer tips should not be shared among multiple business sites

The employer must keep records of all tips received by any employee for three years

All tips must be paid by the end of the month following the month they were collected

Every business must have a written tipping policy, and a copy must be accessible to all staff members

The business is not allowed to retain any portion of the tips collected, even to cover its costs

How

helps you to be compliant

Disclaimer: Take it Personally does not provide legal, tax or accounting advice. This content is for informational purposes only and should not be relied upon for legal, tax or accounting decisions. It's advisable to consult your own advisors before any transactions. Visiting this website does not establish a solicitor-client relationship with Take it Personally B.V.. We expressly disclaim liability for actions taken or not taken based on this website's content. The content is provided "as is," and we make no guarantees of its accuracy.

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