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Guide · money and the law

The Tips Act for restaurants: recording tips and service charge fairly

Since 1 October 2024 a tip left in a British restaurant belongs to the people who work there, in full, shared by rules they can read. The Employment (Allocation of Tips) Act 2023 turned a code of good manners into four duties with dates attached. Here they are in the order they come up on a Friday night.

Published · Facts checked · A practical guide for restaurants in England, Scotland and Wales (the Act does not extend to Northern Ireland), not legal or tax advice.

What the 2023 Act requires

The Act does not create a new law of its own; it adds a new part to the Employment Rights Act 1996, and the sections that matter to a restaurant are short. A tip, a gratuity or a service charge "however described" that a customer pays is a qualifying tip once it reaches the employer, or once the employer has a say in how it is shared. The VAT element of a charge is not a tip.

From there the duties line up. Section 27D says the money is allocated fairly between the workers at the place of business where it was paid. Section 27G sets the clock: no later than the end of the month after the month in which the customer paid. Section 27I asks for a written policy, and section 27J for a record kept for three years, which a worker can ask to see.

The statutory Code of Practice fills in the detail. It came into force with the Act on 1 October 2024 and says, in its first paragraph, that it covers service charges whether they are added automatically or left to the guest. Its example of the deadline is easy to remember: a tip left on 23 June is paid out by 31 July.

Tips, optional service charge, compulsory service charge

For the Act the three are one thing. A ten per cent line printed on every bill, a discretionary line the guest can ask you to remove, and a note pushed into a glass jar on the bar all reach your staff in full and under the same fairness rule. The only money outside it is a cash tip a waiter is handed and keeps, with nobody at the restaurant deciding where it goes (Code, paragraph 13).

They differ elsewhere. HMRC's catering notice says a service charge you make is standard-rated for VAT, while a tip the guest freely gives above your total is outside VAT. It does not say how a charge the guest may decline is treated, so ask your accountant before you print the word "optional" and charge VAT on it, or the other way round. How National Insurance and PAYE apply to tips and to a tronc is HMRC's guidance E24, and it depends on who decides the split; that too is your accountant's question, not this guide's.

What the guest sees matters as well. The Code calls a service charge voluntary when it is made clear to the guest that the amount is discretionary and there is no obligation to pay it. If that is what you mean, say it in those words on the menu and on the bill. If the charge is compulsory, it is part of the price: the CMA's guidance on the price transparency rules in force since April 2025 lists a mandatory service charge at a restaurant among the charges that belong in the total price, and counts the menu as where that price is shown.

Writing a tipping policy your team can read

  1. Say what you take and how

    Cash, card, a service charge on the bill, a tip added when the guest pays. The Code asks for the policy wherever tips are paid more than occasionally, which in a restaurant means always.

  2. Say who shares and by what measure

    Hours worked, a points split by role, a separate pot for the kitchen. Fairness is judged by the circumstances; a rule written down and applied the same way every month is much easier to defend than one decided at the end of a good week.

  3. Say when it is paid

    Your usual payday, as long as it lands no later than the end of the month after the tips came in. A restaurant on a monthly payroll has very little slack in that.

  4. Give everyone the same copy

    On paper or electronically, in plain words, with the same access for every member of staff (Code, paragraphs 36–37). Putting it on the wall for guests is allowed and often welcome, but the Act does not require it (paragraph 40).

Records you must keep for three years

The record has two halves: every qualifying tip the business received, and how much of it went to each worker. Paragraph 43 of the Code asks for it to be kept for three years from the day the tip was paid. A worker may make a written request for the record of the place they worked, once every three months, going back over the whole period (paragraph 44), and you have to be able to answer from the record rather than from memory.

In practice that means three things to keep together: what each service took in tips and service charge, what was handed out and to whom, and which rule from your policy decided the split. A month of card statements and a spreadsheet of names can do it, as long as the two agree and somebody owns it. The record that fails is the one rebuilt in a hurry after a former waiter writes in.

How tips are recorded on the bill in Slotora

Slotora is a restaurant system that runs from the booking to the bill on the tablets you already have. On the bill at the table, a service charge can be set by party size and marked optional or compulsory, so every check says which it was. Each payment is recorded as cash, card or other, with the tip that came with it, and one bill can carry several payments. VAT is shown by class on the bill for UK and Irish restaurants.

A guest paying from the table's QR code chooses their own tip, and the card payment goes straight to your own Stripe account once it is connected, with no Slotora commission. The tips ledger then adds up the tips and service charges taken and records each hand-out: the period, the named members of staff, and how it was split. It can serve as the second half of the record the Code asks for, kept where the money came in.

The sales reports export daily takings, VAT by class and the dishes sold as CSV files for your accountant, and the screen says plainly that it is not a tax return.

What Slotora does not do: payroll

  • Slotora works out no pay, no tax and no National Insurance. The tips ledger is a record of hand-outs; the money itself reaches your staff through your payroll.
  • The rota and time clock give your accountant the hours each person worked, as a CSV, which is often the measure a tips policy shares by. Hours, not wages.
  • Your tipping policy stays yours to write. The ledger is how you show you kept to it.

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The Tips Act: short answers

Does the Tips Act cover a compulsory service charge?

Yes. The Code of Practice covers service charges whether they are added automatically or left to the guest, and the Act counts a service charge however it is described.

When must tips be paid to staff?

No later than the end of the month after the month in which the customer paid them. A tip left on 23 June is paid by 31 July.

How long do tip records have to be kept?

Three years from the date the tip was paid, and a worker may make a written request for the record of the place they worked.

Do I have to show my tipping policy to guests?

No. It must be available to every member of staff; sharing it with guests is allowed but not required.

Sources (checked 24 October 2026, the service-charge and extent lines 26 October 2026; not legal or tax advice)

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