It will become illegal for companies to not pass tips on to their employees.
The decision by the government has come about aftersome major restaurant chains were accused of keeping 10% of tips given to staff.
The Department for Business Energy and Industrial Strategy (BEIS) have announced that new legislation, to be introduced within a year, would help about two million people in the hospitality industry.
The current rules for taxing tips, gratuities and service charges are complex and, whilst all tips are taxable, national insurance does not currently apply where the payment is given directly to the staff member.
For current HMRC guidance on the taxation of tips, gratuities and service charges click here.