If you tip - use cash.

An article in the Independent discussing what actually happens to the "optional" service charges you pay via credit card surcharge when eating out.

Particularly bad revelations in the article:

Some restaurants use the money towards paying minimum wage!!
One example is Tuttons Brasserie in Covent Garden - which adds 15% to the bill and then uses it towards paying the minimum wage to waiters.. Chez Gerard do the same with their 12.5% charge. As do: Carluccio's, Café Rouge, Strada and Caffé Uno.

Others, such as Zizzi and ASK, do not pass on credit/debit card gratuities to waiting staff at all. (Even worse!)

Georgetown Colonial Malaysian Restaurants, takes 100 per cent of its 10 per cent service charge.

Even Pizza Express charge an 8% admin fee from the service charge. (Though comparatively that looks like good behaviour.. though it is way above the 1.5% credit card processing cost!)

Appalling.

But then I've been suspicious for years and generally tip in cash anyway.

My standard approach is:

1) Demand the optional service charge is removed (if added by default) or skip the gratuity option on the card reader.

2) Tip 10% in cash if the service has been good, and nothing if it has been bad. If service was absolutely outstanding I might pay more than 10% (Outstanding restaurant service in London is virtually non-existent - so this doesn't happen often!) Being tight I may tip less than 10% if I don't have the right notes/coins in my wallet ;-)

I certainly won't pay 12.5% service if it is added automatically - as that is a mickey taking liberty some restaurants seem to have recently decided upon. It's 10% people - it has always been 10% - and you should not be adding it to your bills automatically....

On a better note - another article says:
"The editor of Britain's gastronomic bible, the Michelin Guide, backed the campaign and said he was considering listing the tipping policy of every restaurant in future editions to provide transparency for customers."