Remember the days when most people used cash? For a tip, coins and notes could be left on a table or slipped into your hand to either go into a tip jar or perhaps, directly into your pocket.
If you shared those tips though, it was super easy. You could just pool the cash, split between the team on shift and then start again. No waiting and no admin.
The thing is, we’ve moved on. Fewer and fewer people are carrying cash on them as it becomes faster and easier to pay with cards, phones, watches and even rings. But what that does that mean when it comes to tipping?
Unless you have your own card reader or want to share personal details, it’s quite hard to cashlessly tip someone and even harder if those tips are split between a team!
The HMRC in the UK, aka “The Tax Man”, has strict rules on tipping. If your employer collects tips on your behalf - like when they’re added to a bill or transaction - and they have a say in how they’re distributed, then that makes your tip eligible for National Insurance Contributions as well as Income Tax.
If you’re a basic rate tax payer, that £10 tip becomes just £6.80 after 12% (£1.20) Employees National Insurance and 20% (£2.00) Income Tax. If your tips get added to your wages to be paid out, this will be done automatically through PAYE.
So, what can we do about it? If the tip is paid to you directly, including tips paid to you by card then you don’t have to pay Employees National Insurance. What does that do to our £10 tip? Well now you get to take keep £8.00 (£10.00 tip - £2.00 tax), which increases your take home by almost 18%!
Luckily for you, Tipd - the cashless tipping app - is here to help. Sign up to Tipd and you’ll get a personal profile and QR code. When someone wants to tip you without cash, show them your QR code or share your profile link for them to tip you. The full tip amount will be in your bank account in 2 working days, making it easier and faster than adding tips to bills / card machines; and most important, there’s more tip for you and less for the tax man. Win-win!
If you run a business where you collect tips for your team, see our other article on how Tipd can save you almost 14% on your business costs