Lee Sharpe looks at the new Tipping Act and the tax implications for employees and employers.
The new Tipping Act (The Employment (Allocation of Tips) Act 2023) received Royal Assent in 2023, but is being enforced from 1 October 2024. This article considers how the new regime will affect employees and employers, focusing on the tax aspects.
Background
Tips are commonplace in hospitality, be it cash left on a restaurant table or added to a payment for a round of drinks, but also in traditionally cash-centric businesses, such as hairdressing and taxi driving.
As tippers, we tend to think of a tip or gratuity as a reward for good service. But we also see restaurants add (say) a 10% service charge – effectively a presumption by the business that customers will want to tip for good service; sometimes these service charges are optional – a &lsquo
