Well it depends!
You'll have to pay Income Tax on any tips you get when you're working. But you may not have to pay National Insurance contributions (NICs). You'll usually pay the tax and any NICs through PAYE (Pay As You Earn). Tips can sometimes count towards the National Minimum Wage (NMW).
Tips
A 'tip' is a payment that is freely given by the customer, normally in return for services. A compulsory service charge is not a tip because it is not freely given.
How your tax is worked out, and whether NICs are due, depends on the arrangements involving:
who the tips are given to
who decides how they're shared out
Cash tips paid directly to you by the customer
If you get cash tips direct from the customer without involving the employer, you'll have to pay tax on them - but not NICs. You are responsible for telling your Tax Office about these tips and you'll have to show them on your Self Assessment tax return (if you fill one in). You'll need to keep a record of the tips you get so you can do this.
Most people don't have to fill in a tax return. If you don't, your Tax Office will estimate the tips you're likely to get and give you a tax code that will collect the tax through PAYE. Get in touch with your Tax Office if you think the estimates wrong.
Tips paid as part of a card or cheque payment
Some customers may pay their bill by cheque or credit/debit card and add your tip to the payment made to your employer.
If your employer decides to pass on cheque and credit/debit card tips to you they may pass them directly to you or to a 'tronc' (or pool) which shares out tips amongst the staff who are tronc members.
If your employer passes the tip on to you directly:
it's their responsibility to collect tax on it through PAYE
if the employer decides how the tips should be shared out, NICs are due and it is always the employer's responsibility to collect these through PAYE
if the employer doesn't decide or influence how the money is shared out amongst the employees NICs will not be due
If your employer passes on tips paid as part of a credit card or cheque payment via a tronc - or pooling arrangement - the rules in the section below apply.
Tips paid into a tronc and shared by staff
Sometimes tips are pooled and then shared out between all the staff. This is known as a tronc and the person who shares out the tips is called a 'troncmaster'.
When the tips are shared out, the troncmaster has to deduct Income Tax from them through PAYE.
The rules on NICs where there are tronc arrangements in place are as follows:
if your employer decides how the tips are shared out, you'll have to pay NICs on them as well as tax - your employer (not the troncmaster) has to collect the NICs through PAYE
if your employer doesn't decide how the tips are allocated to employees through the tronc, NICs won't be due
Your employer has to tell us if there's a tronc and who the troncmaster is. If it's you, you'll be the one responsible for collecting the Income Tax through PAYE.
You can get help and advice on what you've got to do from the Business Support Team at your Tax Office.
Tips and the NMW
Your employer can use your tips to make up your wages to the NMW. If they do, they must pay your tips through their payroll with your wages.
Service charges
A service charge is an amount added to the bill before it's given to the customer. A compulsory service charge is not a tip. If your employer gives it to you, it's treated in the same way as your wages and you'll pay tax and NICs on it. Your employer can always use a compulsory service charge to make up your wages to the NMW as long as it is paid through the payroll.
If it's a voluntary service charge, it's treated in the same way as a tip. How you pay tax and NICs on it depends on whether it's:
cash that is paid direct to you by the customer and that you keep
added to a card or cheque payment
pooled in a tronc
Bonuses
If your employer pays you a bonus, it's just part of your pay for the job - and you'll pay tax and NICs on it through PAYE. Your employer includes it on your payslip with the rest of your pay.