Money, in brief

A tip is money a customer chooses to give, but in much of the United States it is not an extra on top of the wage - it is a large part of the wage itself. [1][2]

The US federal minimum wage is $7.25 an hour. For a worker who receives tips, the cash wage an employer must pay drops to $2.13, and tips are expected to cover the gap. [1][2]

Kate Santos, a waitress at a bar in Queens, New York, says servers there are paid $11 an hour: "If people don't tip, it's a bad day for me." [1]

The Internal Revenue Service, which collects federal taxes in the United States, says a payment is a tip only if the customer chooses to pay it and decides the amount. [13]

An 18% service charge a restaurant adds automatically is wages, not a tip, and must appear on the worker's pay records as pay. Calling a charge a tip does not make it one. [13]

That line is now worth money. A US tax package signed in July 2025 lets tipped workers deduct up to $25,000 of qualified tips from taxable income for the years 2025 to 2028. [9][11]

Britain went the other way. A law in force since October 2024 requires employers to pass on all tips, gratuities and service charges to the staff at that workplace. [3]

Twenty-nine restaurant workers at Harrods, a luxury department store in London, are taking it to an employment tribunal this month. Harrods passes on the optional 12.5% service charge but keeps a compulsory GBP 1-a-head cover charge. [3]

It is the first test of what counts as a tip under that law. The workers say managers can remove the cover charge on request, so it behaves like a tip; Harrods denies this. [3]

Tipping is being asked for in more places than before - coffee shops, pubs, self-checkout machines and robot bars, often before any service has happened. [2][4]

Restaurants that dropped tips and raised menu prices instead found customers read the new prices as expensive. Talulla in Cambridge, Massachusetts raised prices 23%, lasted one winter and went back. [5]

Chicago's City Council voted to halt future increases in the separate minimum wage for servers and bartenders, according to a Wall Street Journal opinion column. [8]

Why it matters. Watch what the tribunal decides a cover charge is: if it counts as a service charge, every London restaurant using one has to hand it over.

Chicago's City Council voted to halt future increases in the minimum wage paid to servers and bartenders, a Wall Street Journal opinion column reported. The city had been raising that separate, lower floor towards the ordinary minimum wage, a policy Mayor Brandon Johnson counted among his achievements. The city's restaurant trade had been described as close to collapse. The vote leaves the tipped floor where it is, so tips keep carrying the larger share of what a server earns. [8]

Why it matters. Chicago had been trying to end the arrangement that lets a tip stand in for a wage, and has stopped. Servers and bartenders in the city keep the arithmetic the rest of this edition describes.

A tax package signed in July 2025 lets US workers deduct up to $25,000 of tips from the income they are taxed on, for tax years 2025 to 2028. The deduction shrinks above $150,000 of income, or $300,000 for a couple filing together. The US tax office estimates about 6 million workers report tipped wages, and in September 2025 Treasury and the IRS published a list of nearly 70 qualifying occupations, from bartenders to water taxi operators. It reduces income tax only. [9][10][11][12]

Why it matters. A worker who earns too little to owe federal income tax gets nothing from a deduction against it, so the break does least for the lowest-paid tipped workers. [11][12]

A BBC writer was charged a 10% service fee on a $17 cocktail mixed by robot arms at a Las Vegas bar, and met tip prompts from a robot barista in New York and a self-checkout machine at Newark airport. In the United States the law says owners and supervisors cannot take a cut of a worker's tip. Holona Ochs, a politics professor at Lehigh University and co-author of a book on gratuities, says no legal standard exists for who owns a tip left to a machine. [2]

Why it matters. The protection is written about money passing from a customer to a worker, and in these transactions there is no worker for it to attach to. [2]

Rachel Miller, who owns Nightshade Noodle Bar in Lynn, Massachusetts, dropped tips five years ago and raised prices to pay everyone a wage; her tasting menus now start at $102. She said kitchen staff had been taking home a fraction of what front-of-house made for the same hours. Talulla, in Cambridge, Massachusetts, tried the same in 2020 by raising menu prices 23%, and went back to tipping last September. Tips are not counted as a restaurant's revenue but menu prices are, so the switch also raised its sales tax. [5]

Why it matters. Both owners were paying staff about the same money. What customers reacted to was which number the money appeared in. [5]

Football supporters travelling in the United States for the World Cup told the BBC that tipping there was confusing and expensive. Chris O'Flynn, an Australian fan, said a flat fee is the norm at home and that he often could not work out how much he was meant to add. Robert McNamara said a tip was expected on every drink, adding about $5 a round. O'Flynn's view was that paying staff properly should be the business's job, not the customer's. [6] American guides to the custom now cover everyone from waiting staff to home services. [18]

Why it matters. Visitors meet the arrangement without the habit that hides it, which is why the same bill reads as a shock to them and as ordinary to a local. [6]

Service charges in Britain used to appear mainly in restaurants and are now asked for in pubs, coffee shops and at self-service machines, often before any service has happened. Lisa Harris, a food and drink consultant, told the BBC that restaurant service charges are drifting from 12.5% to 15%. The Guardian reported that an optional service charge avoids tax in a way a menu price does not, and that hospitality businesses facing higher minimum wage and national insurance bills are content for customers to top wages up. [1][4]

Why it matters. British customers are being moved onto the American arrangement without the American rule that a tipped worker's pay must be topped up to the minimum wage. [4][7]

The Internal Revenue Service says a payment is a tip only when the customer voluntarily decides to pay it and decides the amount. An 18% service charge added automatically by a restaurant is wages, and the employer must show it on the worker's W-2 pay statement. Its guidance states plainly that describing a payment as a tip does not settle the matter. Employees must report cash tips of $20 or more in a month to their employer by the tenth of the following month. [13][14][19]

Why it matters. The same sentence decides two things: whether the money is protected as a worker's tip, and whether it qualifies for the new deduction. [13][15]

Britain's parliamentary Treasury Committee, a group of MPs, said comparing student loan repayments to phone contracts or cinema tickets in presentations to teenagers amounted to mis-selling by government. Its report said students were not told clearly enough that loan terms could be changed after they had signed, and it called for a reversal of the decision to freeze the repayment threshold. The inquiry drew more than 52,000 responses. The UK government said it was already taking decisive action. [21][25]

Why it matters. A British student loan is set by government and can be altered by a later government, which is the part the sales pitch left out. [21]

Graduates in England and Wales with a Plan 2 loan repay 9% of everything they earn above a threshold, currently GBP 28,470. Rachel Reeves, then chancellor, decided last November to freeze that threshold at GBP 29,385 from 2027 to 2030 instead of letting it rise with prices. No rate changes, but as pay rises more of it sits above the line and is taken. A letter to the UK chancellor said middle-income graduates see less than half of a pay rise once income tax, national insurance and loan repayments are counted. [21][22][23]

Why it matters. A number held still is a rise for everyone whose pay moves, and it never has to be announced as a rise. [22]

Graduates in England paying extra off their loans by choice sent GBP 491.1m in the 2025 financial year, up from GBP 141.7m in 2017, according to BBC analysis of Student Loans Company figures. Luke, a 34-year-old chartered surveyor in London, said extra payments would clear his debt in about six years instead of twelve. Martin Lewis, who founded the site MoneySavingExpert, warned that only higher earners gain from overpaying and that most should not be panicked into it. [24]

Why it matters. A loan written off after a set number of years is not an ordinary debt, so money paid early can buy nothing at all for a lower earner. [24][26]

Charlene Merry, a 31-year-old solicitor from Hull, told the BBC she wanted a better-paid promotion in Leeds and calculated she would end up with less spending money, once higher loan repayments, higher tax and travel costs were counted. She was one of more than 52,000 people who wrote to that committee's inquiry into student finance. Repayments are taken automatically through the tax system, so they rise the moment the pay rise does. [25][23]

Why it matters. The same arithmetic that makes an extra shift barely worth it for someone on benefits is turning up on a professional salary. [25]

The rules change with the nation and the year of entry. A student starting in England from 2023 has a Plan 5 loan, repaid above GBP 25,000 and written off after 40 years. The threshold is GBP 29,385 in Wales, GBP 33,795 in Scotland and GBP 26,900 in Northern Ireland. Plan 2 loans carry interest of retail price inflation plus up to 3% depending on earnings, so someone earning GBP 51,245 or more is charged 6.2%, against 3.2% on Plan 1 and Plan 5. [26][23]

Why it matters. The year someone happened to start university decides their threshold, their interest rate and the date the balance disappears. [26]

The healthcare data firm LaingBuisson puts the average weekly fee for residential nursing care of a frail older person in the UK at GBP 1,465, modelled on an efficient for-profit home with more than 50 beds. Of that, GBP 914 goes on staff wages, including domestic, catering and agency workers. Mike Padgham, who runs care homes in North Yorkshire and chairs the Independent Care Group, said staffing is always the biggest cost and takes about two thirds of fee income. [27]

Why it matters. When a care home is squeezed, the largest thing it can move is the pay of the people doing the caring. [27][28]

As of March 2024, 40% of adult social care workers in England earned below the Real Living Wage, a voluntary pay rate set by a UK charity to track living costs. The Joseph Rowntree Foundation, an anti-poverty research charity, found that nine in ten care workers who changed jobs within the sector got a pay rise. It argues low pay carries hidden costs of its own through turnover: recruitment, agency cover, training time, and contracts handed back when homes cannot staff them. [28]

Why it matters. Low pay is normally counted as a saving. This work counts what the turnover it causes costs the same employers. [28]

Families in the United States paid a median of $34 an hour for a home caregiver last year, according to A Place for Mom, a senior living comparison site, up 3% on the year before. CareScout's 2025 cost of care survey puts the national median at $35 an hour, or $80,080 a year for 44 hours a week, with a private room in a skilled nursing facility at about $129,575 a year. A third set of figures, from the US health department, puts the median at $20 an hour. Medicare, the US government health insurance for people over 65, generally does not cover long-term care. [29][30][31]

Why it matters. The largest predictable expense of old age in the United States sits outside the programme most people assume covers it. [29][31]

Medicare Advantage is private cover that delivers Medicare's benefits, often with dental or vision added. About 34 million people are enrolled, 55% of everyone on Medicare, according to KFF, a US health research group. Insurers have been ending plans, so affected members must find a new one by the end of February or return to traditional Medicare. KFF found 99% of those whose plans ended last year had another available, though a new plan can mean different doctors, different benefits and different rules. [32]

Why it matters. The member is committed for the year and the insurer is not, so when costs rise it is the patient who has to move. [32]

Family health cover bought through an employer in the United States rose 6% in 2025, or $1,408, according to KFF. The average worker now pays $6,850 a year out of their own pay towards family coverage. Premiums had already risen 7% in each of the two preceding years. Employers have said they plan to pass more of the cost to staff, and rising prices for health services and prescriptions are expected to push premiums up again next year. [33]

Why it matters. This is a pay cut that never appears on a payslip as one, because it is taken as a deduction rather than shown as a smaller wage. [33]

The average annual premium for full-coverage car insurance in the United States reached $2,237 in June, 0.7% higher than in January, according to the comparison site Insurify. Premiums had fallen in 2025 after years of increases, but drivers in more than half the states are paying more again. Petrol has stayed above $4.00 a gallon since the war with Iran began, against $3.14 a year earlier, and repair bills are climbing. A Wall Street Journal analysis argues insurers still have room to cut rates. [34][37]

Why it matters. A premium moves on repair costs, weather and theft across a whole state, none of which the individual driver did. [34][36]

Oscar Scullion, an 18-year-old student, shares a Peugeot 208 with his brothers; their insurance costs GBP 2,200 a year, down from GBP 2,600 when he passed his test, leaving him a GBP 700 annual bill. Figures from CompareNI indicate Northern Ireland is the most expensive part of the UK for younger drivers outside London, with premiums averaging more than GBP 3,000 in some areas. Another young driver told BBC News NI he was quoted GBP 7,000. [35]

Why it matters. A price built from the record of everyone in a postcode and an age band lands on a driver who has no record of his own yet. [35]

Owners of properties in England valued above GBP 2m will pay an annual surcharge on top of council tax from 2028, starting at GBP 2,500 and rising to GBP 7,500 for homes worth GBP 5m or more, across four bands. Most of the properties are in London. The Office for Budget Responsibility, which checks the UK government's sums, expects it to raise about GBP 400m a year by 2029-30. The UK Treasury says it will apply to fewer than 1% of English properties. [38]

Why it matters. The Institute for Fiscal Studies, a UK research body, said there is a reasonable case for taxing high-value homes and that this design leaves much to be desired. [38]

Council tax in England is charged on what a house was hypothetically worth in 1991, even for houses built since. The bands stop at GBP 320,000, while UK house prices have risen more than fivefold since then. An economist writing in The Conversation argues the result is that the single occupant of a GBP 2.5m house can pay less than a married couple in a far cheaper one. He says the tax survives because it is cheap to collect, raises a lot, and nobody agrees what should replace it. [39]

Why it matters. The new surcharge on GBP 2m homes is being bolted onto a valuation that is 35 years out of date. [38][39]

Andy Burnham has become Britain's prime minister, with John Healey as chancellor, promising help on transport costs, on how much people can earn before being taxed, and on care and housing. The BBC pointed out that Keir Starmer and Rachel Reeves had said much the same in January. They took about GBP 150 off a typical annual energy bill in April by cutting some levies and moving others onto general taxation, and bills rose again after the US and Israeli strikes on Iran. [40]

Why it matters. Two governments within a year have promised the same relief, and the price of gas has decided the result both times. [40]

The Joseph Rowntree Foundation's cost of living tracker for winter 2025 found that 58% of low-income UK families had heated their home less than they needed to, and 51% had cut spending on food. The charity says hardship has barely improved since its surveys in October 2024 and May 2025. Its modelling projects these families' incomes after housing costs will still fall by the end of this parliament, even after the Budget scrapped the two-child limit and lowered energy bills. [41]

Why it matters. Four years into the crisis, the measures being counted as relief are not yet showing up in these households. [41]

Rachel Reeves, then Britain's chancellor, said help with gas and electricity bills would go to households by income rather than to everyone, as it did in 2022. Her reason was that under the universal scheme after Russia invaded Ukraine, the best-off third of households received more than a third of the support. Economists writing in The Conversation put the typical annual household energy bill at GBP 1,725, still more than GBP 450 above pre-crisis levels. [42][43]

Why it matters. Aiming help by income requires a measure of income, which is how a support scheme acquires a threshold and an edge to fall off. [42]

Only 33% of US adults correctly understand how long a 65-year-old can expect to live, according to a report by TIAA, a US retirement provider, covered by MarketWatch. People who assume a short retirement save less for it. The report calls the gap a critical retirement security challenge, because the saving happens decades before anyone finds out the answer. [44]

Why it matters. A wrong estimate of your own lifespan quietly sets how much you put aside to live on. [44]

A banking hub opened in Monmouth, Wales, the 121st in twelve months, marking the first anniversary of access-to-cash rules from the Financial Conduct Authority, Britain's financial regulator. The rules require banks and building societies to assess the effect before closing a branch or an ATM, and to fill any significant gap they find. A further 93 cash deposit services, such as ATMs and Post Office counters, have been set up, and 20 hubs followed requests from local communities. Another opens in Stamford, Lincolnshire this month. [46][47] The regulator now publishes its cash coverage figures twice a year rather than quarterly. [48]

Why it matters. A closure that used to be a bank's decision alone now has to be answered with something, and residents can trigger the review themselves. [46]

A large US food or drink business has to file Form 8027 each year, an information return declaring the tips its staff reported and any tips it allocated to them. Employers can claim a separate credit, on Form 8846, for the social security and Medicare tax they paid on employees' tips. The tax office also points employers and workers to Revenue Ruling 2012-18, which sets out the difference between a tip and a service charge. [17][20][16]

Why it matters. The paperwork shows how much of this is already treated as pay: the state counts it, taxes it, and gives the employer a credit for the tax on it. [17][16]

The Financial Conduct Authority published a survey of around 400 wealth management firms in Britain. Between them they manage close to GBP 1 trillion for more than 5.5 million ordinary clients, in what is called discretionary portfolio management, where the firm makes the investment decisions for the client. The regulator said growth must be matched by clear governance, financial crime controls, fair value and careful use of technology including artificial intelligence. [45]

Why it matters. More than five million people have handed the decisions to somebody else, and this is the first place a reader can see how many firms are holding them. [45]