Guides Troncs and National Insurance
What is a tronc? Tips, troncs and National Insurance
A tronc is simply the arrangement for pooling and sharing tips among staff, run by someone other than the employer. It matters because of one tax rule: tips paid through a genuinely independent tronc are free of National Insurance, for the employer and the worker. On a typical hospitality tips pool that is a meaningful sum, and HMRC polices the word “genuinely”.
The definitions
HMRC’s guidance E24 keeps it short:
“A troncmaster is the person, other than the employer, responsible for arrangements to share tips among employees.”
The tronc is the arrangement; the troncmaster is the person who runs it. The Tips Act 2023 recognises the same idea as an “independent tronc operator” (§27F): where an employer arranges for tips to be allocated by an independent operator, and it is fair to make that arrangement, the employer’s fair-allocation duty is treated as satisfied.
The National Insurance exemption
The exemption itself, and its two conditions, come from E24:
“Payments of tips do not attract National Insurance contributions if the:By allocation we mean deciding who should receive what amount by way of tips.”
- troncmaster is allocating money that originally was not paid to the employer and the employer does not pay the money directly or indirectly to their employees
- employer does not determine, directly or indirectly, the allocation of those tips
Both legs matter, but the second is the one venues trip over. The employer must not decide, directly or indirectly, who gets what. E24 spells out when the employer stays PAYE-responsible:
“The employer is responsible for operating PAYE where either:”
- the employer is involved in deciding the distribution of tips amongst employees
- mandatory service charges are distributed through the tronc
Note the second limb: a compulsory service charge is not a tip. It is business revenue, and routing it through the tronc collapses the arrangement. Only voluntary tips and voluntary service charges belong in the pool.
What the exemption is worth
At current rates the exemption is 15% employer Class 1 NI the venue does not pay, and 8% employee NI that stays in the team’s pockets. Slide to your annual tips volume:
Indicative, current Class 1 NI rates, voluntary tips. Delivered by a properly constituted tronc with an independent troncmaster.
Who cannot run the tronc
“If the employer, business partner or an official of the company (for example, a director) performs the role of troncmaster, they are considered to be making payments as if they were the employer. This means payments should be paid through the employer’s payroll.”
So the owner, a partner, or a director acting as troncmaster does not just risk the exemption; it never applied. A senior employee below director level, a staff committee, or an external firm can all hold the role. Who is allowed to do it, and whether you need one at all, is covered in Do I need a troncmaster?
Income tax still applies, through a separate PAYE scheme
The exemption is for National Insurance only. Income tax is due on tips however they are paid, and a tronc runs its own PAYE scheme to collect it:
“A PAYE scheme must be set up for the tips in the troncmaster’s name unless different PAYE arrangements need to be made. The troncmaster is personally responsible for all aspects of operating a PAYE scheme. They may be held responsible for any failure to deduct tax from payments from the tronc.”
The troncmaster may use the employer’s payroll software, with the employer effectively acting as payroll agent, but E24 requires the tronc’s PAYE records to be kept separate and the scheme to be run independently. In practice many troncmasters delegate the mechanics to the venue’s accountant. HMRC’s internal manual (PAYE20160) covers how the scheme is registered.
One asymmetry worth knowing: the troncmaster’s personal liability is for income tax. Where NI is due on a tronc payment, calculating and paying it rests with the employer, not the troncmaster (E24 §8).
What a tronc does not change
The Tips Act duties sit underneath all of this and do not move: tips passed on in full, paid by the end of the following month, a written policy, and three years of records. A tronc changes who decides the split and how the tax works. It does not change the employer’s legal duties under the Act, and the employer keeps a duty under the Code of Practice to make sure the tronc is operating fairly (Code §31–32). Start with the Tips Act guide if those duties are new to you.
Sources
This guide summarises the primary sources below, as in force on 24 August 2026. Quotes are verbatim.