Yes, service fees (or service charges) are mandatory, legally binding charges set by businesses, distinguishing them from voluntary tips. These fees, common in hospitality for large groups,, to cover staff costs or administrative expenses, must be paid as part of the final bill. They are not considered tips, and businesses, not employees, typically control them.
There are only limited circumstances in which you can withhold payment of your service charges without breaching the terms of your lease. These are to do with the way the landlord has issued your service charge demand.
No. A business is generally free to charge however much it wants and can then provide a breakdown of the various fees that are included in its listed or advertised price. But the posted price must include the full amount that a consumer must pay for that good or service.
Discretionary Charges. While restaurants are allowed to add a service charge to bills, they are not allowed to make it compulsory unless it is explicitly communicated.
The law states that any service charge contributions are held on trust by the landlord, for the leaseholders. This means, in practice, that the money can be held in one or more account such as a bank or building society to be used for the purposes set out in the lease.
According to UK law, service charges added by the restaurant are entirely optional.
Tenants can challenge a service charge if they believe it is excessive or unfair, but simply refusing to pay without a valid reason can lead to legal consequences, including eviction.
Normally no as the payment of service charge is a firm and legal obligation duty laid out within the lease you would have signed when buying your property.
The overwhelming majority of service charges in the UK are what's called 'discretionary'-meaning, the customer has the right to have it removed if they don't wish to pay.
If it is made clear to the customer that the charge is a purely discretionary amount and there is no obligation to pay, the payment is a voluntary service charge. HMRC will accept that a payment is a voluntary service charge if it is clearly presented to the customer as an entirely optional payment.
The reality is that service fees help businesses cover operational costs and continue providing quality service. From gas and insurance to staff wages and facility maintenance, every aspect of running a business requires financial investment.
Restaurants charge a service fee to cover rising operational costs (food, rent, labor) and boost profit margins, often using it to provide more stable, higher wages for all staff (including kitchen crew) without dramatically raising menu prices, a strategy that became widespread post-pandemic to avoid customer complaints about higher menu costs and address wage disparities. While traditionally for large parties, it's now common, and this mandatory fee goes to the business for allocation, unlike optional tips.
The Central Consumer Protection Authority (CCPA) has issued clear guidelines: Service charge is never mandatory. You can refuse to pay if you're unhappy with the service. Restaurants must clearly mention their service charge policy on menus.
The answer is yes, it is legal. Businesses do have a constitutional right to refuse service to anyone, especially if they are making a scene or disrupting service to other customers in their business. However, there are limits to the refusal.
Section 42 of the Landlord and Tenant Act (LTA) 1987 provides that contributions to certain variable service charge funds (and to sinking funds) in respect of residential property should be paid into a trust fund.
The new tipping legislation under the Employment (Allocation of Tips) Act 2023 came into effect on 1st October 2024. This law saw a big change to the hospitality sector and means that employees now keep 100% of their tips, gratuities, and service charges without any deductions.
The amount you tip in the United Kingdom will depend on where you are and what type of services you're buying. As a general rule, expect to tip around 10% of the bill. If you get exceptionally good service, say thank you with a tip closer to 15-20%.
If you're still not satisfied, you can challenge the charges at the First-tier Tribunal (Property Chamber) which is administered by HM Courts and Tribunals Service. You may have to pay a fee so we recommend seeking legal advice before applying to them.
In the UK, the average service charge for a flat is between £1,000-£2,000 per year, although this number can differ depending on the size, age, and location of the property. Service charge is calculated based on estimated running costs.
Tipping in London's restaurants
However, restaurants often add on a service charge (usually 12.5%), especially if you're in a large group, so it's worth checking your bill if you don't want to tip twice. It's not customary to pay a tip (or gratuities) for fast food, self-service or takeaway meals.
You cannot opt out of paying your service charges, even if you do not use the services you are paying for. For example… If your building has a lift and you live on the ground floor. If your building has a garden but you never use it.
The most valid reasons for refusing service involve threats to safety, disruption, illegal activity, or violation of clear policies, like intoxication, harassment, or extreme rowdiness, ensuring refusal is based on behavior, not discrimination (race, religion, etc.). Legitimate reasons also include health code violations (e.g., no shoes/shirt) or if a business is closed or at capacity, provided it's applied equally and doesn't mask discrimination.
For a discretionary service charge, a customer simply has to ask to have it removed from the bill before paying. A server may ask why this is, or they may simply do it without question – there is no right or wrong approach.
The short answer is yes, guests should still tip on top of service fees at restaurants because these fees often aren't meant to replace tips.