Enter your net sales for the period and your service charge percentage. The tool shows what a discretionary service charge and a compulsory (contractual) service charge each look like once VAT and any admin fee are accounted for, so you can see exactly what reaches staff either way.
Leave at 0% for standard UK compliance
For a service charge to be genuinely discretionary, guests need a real, unpressured ability to reduce or remove it. Printing it as an automatic addition to the bill with no practical way to query it can tip a charge into being treated as compulsory regardless of the label used.
HMRC looks at how a charge actually operates in practice, not just what it's called. A charge marketed as discretionary but applied automatically with no real opt-out may still be treated as compulsory and VATable. When in doubt, take advice on your specific menu wording and booking terms.
Since the Employment (Allocation of Tips) Act 2023, staff and guests are entitled to see a written policy on how tips and service charge are distributed. Being clear about the split, and about what if anything the business retains, avoids disputes and supports recruitment and retention.
Running service charge distribution through an independently administered tronc can still bring National Insurance advantages for staff, whichever policy you choose. This calculator covers VAT and the headline payout only; speak to your payroll provider about tronc set-up.
This calculator provides general estimates and is not tax or legal advice. JWBIZ Ltd accepts no liability for VAT, payroll or policy decisions made on the basis of this tool; confirm treatment with your accountant.