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Invoice Service Charge Calculator

Work out a service charge, whether it is taxable, and where the money goes.

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Quick Tool Overview

The Service Charge Calculator works out the charge, the per-cover share and the distribution to staff, and gets the tax treatment right — which in the UK turns entirely on whether the charge is genuinely discretionary.

What it does
Works out a service charge and its tax
You give it
The bill, the rate and whether it is optional
You get back
The charge, the tax treatment and the per-head share
Best for
Restaurants, bars, hotels and caterers
Invoice Tools Free, unlimited use No sign-up Runs in your browser

About the Invoice Service Charge Calculator

A service charge is a percentage added to a bill for the service itself, and it raises three questions that have different answers in different places.

Is it taxable? In the UK, a genuinely discretionary service charge is outside the scope of VAT; a compulsory one is standard-rated. That distinction rests entirely on whether the customer can refuse to pay it, which means the wording on the menu and the bill decides the tax treatment.

Does it go to staff? In the UK since October 2024, employers must pass on all qualifying tips and service charges to workers in full and have a written policy. Several US states and EU countries have similar rules. A service charge retained by the business is a price increase, and calling it a service charge does not make it one.

And what does it come to per head? This works out all three: the charge, the tax treatment, the per-cover share, and what each staff member receives under a stated distribution.

Key features of the Invoice Service Charge Calculator

Discretionary or not

The distinction that decides whether VAT applies.

Per-cover share

What each person is contributing, which is what they ask.

Distribution to staff

UK law now requires it to be passed on in full.

Common rates

10%, 12.5% and 15%, with the effect on the total shown.

Wording matters

What the bill says decides the tax treatment, not what you intended.

How to use the Invoice Service Charge Calculator

  1. 1

    Enter the bill

    The food and drink total, before the service charge.

  2. 2

    Set the rate

    10%, 12.5% and 15% are the common ones.

  3. 3

    Say whether it is discretionary

    It decides the tax treatment, so the wording on the bill matters.

  4. 4

    Read the per-head figure

    What each cover is contributing, which is what customers actually ask.

  5. 5

    Check the distribution

    How it splits across the team under your policy.

Frequently asked questions

In the UK, a genuinely discretionary service charge is outside the scope of VAT; a compulsory one is standard-rated as part of the supply. The test is whether the customer is free not to pay it, which the wording on the menu and the bill determines.

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