A note before we start: we make Seamless, a hospitality EPOS. We're not accountants and this isn't tax advice. It's the plain-English explanation we wish existed when our own customers ask us about tips. For your venue's specifics, talk to your accountant or a tronc specialist.
If your venue takes card tips, and in 2026 almost all tips arrive by card, there's a decent chance you're paying thousands of pounds a year in National Insurance that a properly run tronc scheme would legally remove. With employer NIC at 15% and the threshold down at £5,000, the saving has never been bigger, and with the National Living Wage rising again in April 2026, margins have never needed it more.
What a tronc actually is
A tronc is an organised arrangement for pooling and distributing tips, gratuities and service charges to staff. The word comes from the French tronc des pauvres: a collection box. The modern version is a separate mini-payroll, run by a troncmaster, that handles tips independently of the employer's payroll.
That independence is the entire point. Under HMRC's rules (guidance booklet E24), tips distributed through a tronc are exempt from National Insurance, both the employer's 15% and the employee's 8%, provided the employer doesn't decide, directly or indirectly, who gets what. Income tax still applies in full; the troncmaster deducts it through the tronc's own PAYE scheme. A tronc is not a way to pay tips tax-free. It removes National Insurance, nothing more. But that is a lot.
The maths at 2026/27 rates
For every £1,000 of tips routed through a compliant tronc rather than the main payroll:
- The business keeps the £150 employer NIC it would otherwise pay
- Staff keep the £80 employee NIC that would otherwise be deducted
- £230 per £1,000 stays with the business and the team
A wet-led pub or busy café putting £40,000 of card tips and service charge through in a year is looking at £6,000 the business keeps and £3,200 extra in the team's pockets. A table-service restaurant doing £120,000 in tips: roughly £18,000 and £9,600. Income tax is due either way; the saving is purely the National Insurance.
What the Tipping Act changed
The Employment (Allocation of Tips) Act 2023 came into force on 1 October 2024, and it sits alongside the tronc rules rather than replacing them:
- 100% of tips must reach staff. No deductions for card fees, breakages or admin. Qualifying tips belong to the workers.
- Allocation must be fair and transparent, following the statutory Code of Practice, with a written tips policy available to staff.
- Records are mandatory. Staff can request the tipping record, and disputes can go to an employment tribunal.
- Tips must be paid by the end of the month following the month they were received.
The Act governs fairness and transparency, while HMRC's E24 rules govern tax treatment. A venue needs to satisfy both, which mostly comes down to having a clear policy, an independent troncmaster, and clean records.
Who can be the troncmaster?
Usually one of two routes: a senior member of staff (a head waiter or supervisor is traditional), or an external specialist provider. Either way, the troncmaster registers a separate PAYE scheme with HMRC, decides the allocation without direction from the owner, runs the deductions, and carries personal responsibility for operating PAYE correctly. Small venues often use a staff troncmaster with their accountant handling the mechanics; multi-site operators tend to use specialist providers.
One thing voids everything: the employer telling the troncmaster who gets what. Independence isn't a formality. It's the legal test the NIC exemption hangs on.
Where your EPOS fits
Every requirement above runs on data the till already captures. Tips added at the terminal are recorded per transaction, per staff member and per shift, which is precisely the record the Tips Act demands and the allocation evidence a troncmaster needs. On Seamless, tips taken through integrated Dojo, SumUp, Teya or Zettle payments are logged automatically, and the reporting splits tips out from sales, so month-end tronc runs are an export rather than an archaeology project. Whatever EPOS you use, the practical advice is the same: make sure tips are captured at the terminal and reportable by staff member. A tronc built on a shoebox of receipts fails the transparency test the moment anyone challenges it.
Frequently asked questions
Do tronc payments avoid income tax?
No. Income tax applies in full, collected via the tronc's PAYE scheme. Only National Insurance is removed.
Do cash tips go through a tronc?
They can, if pooled and handed to the troncmaster. Cash tips kept individually by staff are the employee's own responsibility to declare.
Does a tronc affect the National Minimum Wage?
Tips can never count towards minimum wage; that has been the law since 2009. Wages must clear NMW/NLW on their own.
Is a tronc worth it for a small café?
It depends on tip volume. Below roughly £10,000 of tips a year, the admin can outweigh the saving; see our decision guide. Above it, the numbers usually speak for themselves.
Do I need a tronc to comply with the Tipping Act?
No. The Act requires fair, transparent, full distribution, which can be done through normal payroll. The tronc is what adds the NIC saving on top.
Sources: HMRC guidance E24 (tips, gratuities, service charges and troncs); Employment (Allocation of Tips) Act 2023 and statutory Code of Practice; 2026/27 NIC rates. Figures are illustrations, not advice. Confirm your venue's position with your accountant.
