Tips and service charges in my café — do I need a tronc, and how does PAYE work on distributed tips?

Hi Oliver — great that you're thinking about this early, as tips are a classic HMRC enquiry area. If you set up a tronc with a genuine troncmaster (not you or another director) who allocates and distributes the tips independently of the company, the company won't pay employer NIC on those amounts — though the troncmaster still has to operate PAYE for income tax on distributions. Any optional service charge you add to the bill is different: that money belongs to the company, so it must be processed through payroll with PAYE and full employer NIC. Since the Employment (Allocation of Tips) Act 2023 came into force, you also need a written tipping policy and must allocate qualifying tips and service charges fairly within a month of receipt. Keep clean records separating tronc distributions from payroll payments so you can show exactly how each pound was treated. I'd suggest having your payroll adviser review the setup once before it becomes routine.