If tips are not ‘allocated’ by the employer but ‘paid’ by them/via their payroll, would they be subject to National Insurance? How does the tax and national insurance treatment differ when a troncmaster pays out tips rather than the employer?

The Employment (Allocation of Tips) Act 2023 became effective on 1 October 2024 to ensure that all tips, gratuities and service charges paid by customers are allocated to workers without deduction by employers, other than the required statutory deductions where applicable.

Tips received by employees are almost invariably taxable as part of their employment income, but practical issues arise in relation to the collection of the tax.