Tronc: How Tips Are Shared and Taxed in UK Hospitality

If you've worked in a UK restaurant, bar, cafe or hotel, you've probably seen "tronc" on a payslip. It's the system for pooling tips and sharing them out, and it matters because the way it's run decides whether National Insurance is due. Since autumn 2024, the law also requires employers to pass all tips on to workers. Here's how it works, using HMRC's guidance.

Tips, service charges and troncs: the tax at a glance

How the money reaches staff	Income Tax	National Insurance
Cash tips customers hand to staff, kept with no employer involvement	Due, usually collected through the tax code	Not due
Tips shared by an independent troncmaster	Due, through the tronc PAYE scheme	Usually not due
Tips shared by the employer or a director acting as troncmaster	Due, through the employer's payroll	Can be due
Mandatory service charge paid out to staff	Due	Always due

What makes a tronc independent

The key is who decides the split. HMRC describes a troncmaster as someone other than the employer who is responsible for sharing tips among employees. Where the troncmaster controls the tips and shares them out:

• The employer must tell HMRC about the arrangement, unless it started before the 2004 to 2005 tax year.
• A PAYE scheme is set up in the troncmaster's name.
• That scheme must run independently of the employer's own payroll scheme.
• The troncmaster is personally responsible for operating PAYE and can be held responsible for failing to deduct tax.

A troncmaster can use the employer's payroll software, but the records must be kept separate.

The director trap

This is where well-meant arrangements fall over. HMRC says that if the employer, a business partner or a company official such as a director acts as troncmaster, the payments are treated as if the employer made them and must go through the employer's payroll. HMRC's own example is a director chosen by staff to run the tronc: because they're an official of the company, the tips go through the company payroll. The same applies if the employer is involved in deciding who gets what.

Mandatory service charges are different

If a restaurant adds a compulsory service charge and pays it out to staff, HMRC says National Insurance is always due on it, however it's shared. Running it through a tronc doesn't change that. Optional service charges and tips are where the tronc treatment can help.

The fair tipping law

Since autumn 2024, employers, including agencies, must pass all tips, gratuities and service charges on to their workers. HMRC notes the law doesn't change how these payments are taxed or treated for National Insurance. A tronc is one common way to show tips are being shared fairly and transparently.

Tips don't count towards minimum wage

HMRC's guidance is clear that tips, gratuities, service charges and cover charges paid by the employer don't count towards National Minimum Wage pay. So a worker's basic pay must reach at least the minimum wage on its own. Tips come on top.

Card tips and the tronc

Most tips now arrive on card payments rather than in cash. When a tip is added to a card bill, it's paid to the business first, and how it then reaches staff decides the treatment. If it goes into an independent tronc and the troncmaster shares it out, it's taxed through the tronc PAYE scheme. If the employer pays it out through payroll and decides the split, it's treated as the employer's payment. Either way, the tipping law means all of it must reach workers.

If you're a worker

1. Check your payslip for a tronc line or separate tronc payslip.
2. Ask who the troncmaster is and how the split is decided.
3. If you receive cash tips directly, remember tax is still due, usually collected through your tax code.
4. Check your tax code in the HMRC app if it suddenly changes.

Casinos and other workplaces

Troncs aren't only for restaurants. HMRC's guidance includes a casino example, where gaming staff's tips go into a drop box, are kept separate from gaming money and are passed to the troncmaster to share. The same principles apply: an independent troncmaster, separate records and PAYE on the payments.

If you're an employer

1. Decide whether you'll run tips through payroll or set up an independent tronc.
2. If it's a tronc, appoint a troncmaster who isn't you, a partner or a director.
3. Tell HMRC about the tronc so a PAYE scheme can be set up in the troncmaster's name.
4. Keep tronc records separate from your own payroll.
5. Check with HMRC before payments are made if you're unsure about your responsibilities.

My verdict

A well-run tronc is good for staff and fair to the business, but only if it's independent in practice, not just on paper. Choose a troncmaster who isn't running the company, keep the records separate and keep mandatory service charges out of it. If you run a hospitality business, the right POS system makes tips easier to track, and sole trader vs limited company covers the structure question.

Frequently asked questions

What is a tronc?

A special pay arrangement used to share tips, gratuities and service charges among staff, run by a troncmaster.

Do you pay National Insurance on tronc payments?

Usually not, if the troncmaster is independent of the employer. National Insurance can be due if the employer decides the split, and is always due on mandatory service charges.

Who can be a troncmaster?

Someone other than the employer. If the employer, a partner or a director does it, HMRC treats payments as made by the employer.

Do tips count towards the minimum wage?

No. Tips, gratuities, service charges and cover charges don't count towards National Minimum Wage pay.

Do employers have to pass on all tips?

Yes. Since autumn 2024, employers must pass all tips, gratuities and service charges on to workers.