How tip pooling works, why an independent troncmaster removes National Insurance from tips, and what the 2024 Tips Act now requires.
A tronc is a formal arrangement for pooling tips, gratuities and service charges and sharing them out among staff, run by a person called the troncmaster. When the troncmaster operates independently of the employer, tips paid through the tronc are free of National Insurance — though income tax is still due. The word comes from the French for a collection box.
If you run or work in a restaurant, pub, hotel, bar or casino, the tronc is one of the most valuable — and most misunderstood — parts of how staff are paid. Set up correctly, it gets tips to your team efficiently and saves the business significant National Insurance. Set up wrongly, it creates an HMRC bill and, since October 2024, legal risk under the new tipping law.
This guide explains, in plain English, what a tronc and a troncmaster are, exactly how the National Insurance saving works, the independence rule that makes or breaks it, and what the Employment (Allocation of Tips) Act 2023 now requires.
The terminology trips people up, so here it is plainly:
Common allocation methods are by hours worked, by a points system that weights different roles, or an equal split — whichever the troncmaster sets out in the tronc rules and applies fairly and transparently.
The main financial reason to run a formal tronc is the National Insurance exemption. The principle is simple: who decides the allocation determines whether National Insurance is due.
| Route | Income Tax (PAYE) | Employer NIC (15%) | Employee NIC (8%) |
|---|---|---|---|
| Tips via payroll, employer allocates | Yes | Yes | Yes |
| Tips via an independent tronc | Yes | No | No |
For 2026/27 the employer’s secondary Class 1 rate is 15% (on earnings above the £5,000 secondary threshold) and the employee’s primary rate is 8% (between £12,570 and £50,270). A compliant tronc removes both from the tips.
On £120,000 of tips distributed in a year, the employer’s 15% National Insurance alone is roughly £18,000 — saved when those tips run through an independent tronc rather than employer-allocated payroll. Staff also keep the 8% employee NICs on their share. Income tax is still due either way. Actual savings depend on staff pay levels and how tips are received.
A tronc is not a way to pay tips tax-free. Income tax always applies, collected through PAYE by the troncmaster. What a properly run independent tronc removes is National Insurance — nothing more.
The National Insurance exemption hangs entirely on one thing: the employer must not, directly or indirectly, decide who gets what. The moment the employer controls the allocation, HMRC can treat the tips as employer-allocated earnings and charge employer National Insurance.
What protects the exemption in practice:
If the business owner or a director runs the tronc and decides the splits, independence is lost and the National Insurance exemption goes with it. In Palanki v The Big Table Group, the absence of a separate troncmaster bank account and PAYE scheme, and wages and tronc shown together on payslips, were among the features that led a tribunal to find the tronc was not genuinely independent.
Since 1 October 2024, the Tips Act and its statutory Code of Practice have changed what employers must do with tips. The headline rules:
The Act does not change the tax and National Insurance treatment of tips — an independent tronc still works for the NIC exemption — but it does mean your tronc has to be fair, documented and properly run, not just tax-efficient.
Most venues run the tronc alongside an accountant who handles the separate PAYE scheme, the policy and the records, so the NIC exemption is protected and the Tips Act obligations are met. AccTek sets up and runs compliant troncs for hospitality businesses, and links the tronc to the venue’s wider VAT, payroll and accounts. See our hospitality accountants page, or get a fixed-fee quote.
What is a tronc?
A tronc is a formal arrangement for pooling tips, gratuities and service charges and sharing them among staff, run by a troncmaster. When the troncmaster operates independently of the employer, tips paid through the tronc are free of National Insurance, though income tax is still due. The word comes from the French for a collection box.
What is tronc pay or a tronc payment?
Tronc pay, a tronc payment or tronc payments all mean a worker’s share of the pooled tips, paid out through the tronc and shown separately from their wages. Tronc payments carry income tax through PAYE but, through an independent tronc, no National Insurance.
What is a troncmaster?
The troncmaster runs the tronc and decides how the pooled tips are allocated and paid. They can be a senior staff member or an external specialist, and must act independently of the employer, running a separate PAYE scheme registered with HMRC, to keep the National Insurance exemption.
How does a tronc scheme save National Insurance?
If the employer decides how tips are shared, the tips are earnings and attract PAYE and Class 1 National Insurance. If an independent troncmaster decides the allocation, the tips are not earnings for NI, so they carry income tax only — removing the employer’s 15% and the employee’s 8% NICs (2026/27 rates) on those tips.
Are tronc payments tax-free?
No. Tronc payments are subject to income tax at the recipient’s marginal rate, collected through PAYE by the troncmaster. A properly run independent tronc removes National Insurance, not income tax.
Do tips count towards the minimum wage?
No. Tips cannot be used to make up National Minimum Wage or National Living Wage pay. Wages must reach the legal minimum on their own, with tips on top. Since the Tips Act took effect on 1 October 2024, 100% of tips must also be passed to staff with no deductions except those required by law.
AccTek sets up and operates compliant troncs for UK hospitality businesses, protecting the NI exemption and meeting the Tips Act — alongside your VAT, payroll and accounts.
This guide is for general informational purposes only and does not constitute tax or legal advice. Tax rules and employment law change, and individual circumstances vary. Please consult AccTek or a qualified adviser before acting. Rates and rules stated are for the 2026/27 tax year and the Employment (Allocation of Tips) Act 2023 as in force from 1 October 2024.
Official guidance
For the Government’s overview of your rights and duties on tips, see Tips at work (GOV.UK). AccTek Ltd is an independent accountancy firm and is not affiliated with HMRC or GOV.UK.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
