The move means restaurants will no longer be able to cream off gratuities left for servers on diners’ bank cards.
Business Secretary Kwasi Kwarteng is set to announce plans to stop the card loophhole.
The law will ensure the 1.7 million workers in the hospitality industry will be legally entitled to 100 percent of tips their restaurant, pub or bar receives.
It will also apply to jobs like hairdressers in salons where customers leave extra for staff.
As the law stands, owners are not allowed to keep cash tips.
But if a customer adds a tip by card, bosses can decide whether to keep it or pass it on to workers.
It comes after cash use plummeted over the pandemic, making it harder for the likes of serving staff to pocket their own tips.
A Government spokesman said: “Workers going above and beyond for customers can rest assured their hard-earned tips will be going directly in their pockets and nobody else’s. We’re putting an end to dodgy tipping practices and making sure that hard work pays off.
“We are also levelling the playing field for businesses, ensuring good firms which give all the tips to workers are not undercut by the firms which keep the money.”
Mr Kwarteng’s action follows the introduction of the Tips Bill by Tory MP Dean Russell.
His Bill aimed to remove the power of firms to deduct money received by staff in tips, allowing workers to keep it or agree to a pooling system with colleagues.
Mr Russell said: “It’s always felt wrong to me that businesses can take the tips given by the customer directly to that individual or to the staff, and then go, ‘Well, actually, that’s part of the payment for what they’re getting.'”