Tips in a UK Salon: The Tipping Law, Tax and a Fair Tips Policy

A client taps £10 onto the card machine for her colourist. Since 1 October 2024, that £10 isn't the salon's to manage as it likes: the law says who gets it, by when, and what you write down about it. This guide covers the tipping law and its code of practice, the tax and National Insurance on each kind of tip, the minimum wage, and a tipping-policy outline you can adapt.

The rules are as they stood on 3 November 2026 and cover employers in England, Scotland and Wales unless stated. This is not legal or tax advice: for your own arrangements, ask Acas, HMRC or an accountant.

#What does the tipping law require of a UK salon?

The Employment (Allocation of Tips) Act 2023 and its statutory code of practice, both in force since 1 October 2024, put five duties on any employer whose workers receive tips the business controls. Employment tribunals must take the code into account when they decide a tipping dispute.

The law covers workers, including agency workers. It doesn't cover the self-employed, so a genuine chair renter is outside it; more on that below.

#Which tips does the law cover?

Tips you control or significantly influence. The code's test is whether the salon receives the tip or, for a tip a worker receives, whether you have a say in how it is shared out. Almost every card tip is covered; cash is covered once you get involved.

Control doesn't require touching the money. The code says an employer is likely to have exercised control over cash tips if it tells staff how to distribute them, or collects them and pays them out at the end of a shift or through payroll.

#Can the salon take card fees or costs out of tips?

No. Acas says tips you control must reach workers without deductions other than the usual tax and National Insurance. There is no exception for card processing fees, so the fee on a tip is a business cost, like the fee on the bill. The same goes for till shortages, breakages and admin costs.

#How should a salon share tips fairly?

Fair doesn't mean equal. Acas says employers should use clear and objective factors, and the code lists examples you can choose from. Whichever you use must be stated in your tipping policy.

• The type of role
• Basic pay, and how each worker is engaged
• Hours worked in the period the tips came in
• Individual or team performance
• Seniority or level of responsibility
• Length of service
• What the client intended

In a salon, the client's intention is usually the clearest factor: a card tip on a bill that names one stylist was meant for her. A simple policy passes those in full to the stylist named, and pools tips left for no one in particular, such as cash at reception, across everyone who served clients that month by hours worked, juniors and assistants included. Apply it the same way every month, and review it when the team changes.

Agency workers

If you hire staff through an agency, say a nail technician for the run-up to Christmas, the code treats you, the hirer, as the employer for tips. Include them in your allocation, show them the policy on their first day, and tell them who to raise concerns with. You can pay their share directly, by the usual deadline, or pay it to the agency, which must pass it on in full by the end of the following month.

#How are tips taxed in a UK salon?

Every tip is taxable income for the person who gets it; HMRC's employment income manual names hairdressers among workers whose tips are taxable earnings. What changes from tip to tip is who collects the tax and whether National Insurance is due.

A stylist reports cash tips to HMRC in a Self Assessment return, through her personal tax account or by phone. HMRC then usually collects the tax through her tax code, and she should update HMRC if her tips change a lot. Tell new starters this at induction, because many don't know.

Does a tronc make sense for a salon?

A tronc is a separate arrangement for sharing tips, run by a troncmaster who isn't the employer. If the troncmaster, not you, decides who gets what, no National Insurance is due on the tips. Income tax still is, through a PAYE scheme in the troncmaster's name, and you must tell HMRC who the troncmaster is.

The independence has to be real. HMRC says National Insurance is due if you decide the allocation directly or indirectly, for example by requiring the troncmaster to use a points system you set. The tipping code still holds you to fairness: if you learn a tronc is being run unfairly, you must act.

For a small salon, a second PAYE scheme and a genuinely independent troncmaster can cost more than the National Insurance saved, so ask your accountant to run the numbers first.

VAT on tips

HMRC says tips are outside the scope of VAT when they're genuinely given freely. A compulsory service charge is part of the price and standard-rated. The rest of VAT on salon sales is in VAT for UK salons.

#Do tips count towards the National Minimum Wage?

No. GOV.UK says tips, gratuities, service charges and cover charges don't count towards minimum wage pay. Every employed stylist must reach the rate from wages, salary and commission alone: from 1 April 2026 that is £12.71 an hour for workers aged 21 and over, rising to £13.21 in April 2027.

The test runs for each pay period, never longer than a month, so one quiet month can put a well-paid stylist below the line.

Setting rates that hold up in slow months is covered in salon commission structures.

#When must tips be paid, and what records do you keep?

By the end of the month after the month the client paid. The code's example: a tip paid on 23 June must reach the worker by 31 July. For most salons that means each month's tips go out with the next month's payroll.

Records and requests

For each period, record the total tips received, the amount paid to each worker and any amount sent to a troncmaster. Keep the records for three years from the date the tips were paid, and handle them like any other personal data.

A worker can ask in writing to see the record once every three months. The request can cover any period of up to three years in which they worked for you, and Acas says you must provide the records within four weeks. Show the total tips at that workplace and their own share, but not other workers' amounts.

If you don't share fairly, keep a policy or provide records, a worker can bring a claim to an employment tribunal. The tribunal can order you to revise an allocation and award compensation of up to £5,000 per worker.

In Salos, stylist tips sit in the rewards and wallet module (full on Pro and Ultra, limited on Core). Salos doesn't run PAYE or file to HMRC, so tax and National Insurance on tips still go through your payroll software or accountant.

#What should your salon's tipping policy say?

Write it in plain language and make it available to every worker, including agency staff, for example in contracts or on the staff noticeboard. Acas says it must state whether clients are asked or encouraged to tip, and how you make sure tips are handled and shared fairly. The code adds how tips are accepted, allocated and paid, and the factors you use.

What changes on 1 January 2027

From 1 January 2027, under the Employment Rights Act 2025, you must consult before creating or reviewing a tipping policy: with a recognised trade union or worker representatives if you have them, or directly with your workers if not. You must share an anonymised summary of the feedback with the workers affected, and update the policy at least every three years. Acas notes that how this will be implemented is still subject to government consultation, so check its page before you start.

#How do the rules apply to self-employed chair renters?

They don't. The Act and the code don't cover the self-employed, so tips from a genuine chair renter's clients are the renter's own business income, reported through Self Assessment; HMRC lists tips among a sole trader's business receipts. If a renter's client tips on your card terminal, the money is the renter's: hand it over the way your agreement says, as you would their takings.

Status decides whether this applies at all. If you set a "self-employed" stylist's hours and prices and take her clients' money, she may be your worker in law, and the tipping rules then cover her tips. Our guide to chair rental vs employing stylists explains the tests.

#Does any of this differ in Scotland, Wales or Northern Ireland?

The tipping law and code apply in England, Scotland and Wales. They don't apply in Northern Ireland, where employment law is devolved; check nidirect or ask the Labour Relations Agency about any rules on tips there. HMRC's income tax and National Insurance rules on tips, and the National Minimum Wage, apply across the UK. More guides like this one are in Fully Booked's international edition.