Prepare your workspace by lining a baking sheet with parchment paper. Have all ingredients measured and ready to go, as toffee-making requires constant attention.
Combine butter, sugar, corn syrup, water, and salt in a heavy-bottomed medium saucepan. Clip on your candy thermometer, ensuring it doesn’t touch the bottom of the pan.
Cook over medium heat, stirring constantly with a wooden spoon or heat-resistant spatula until the butter has completely melted and mixture begins to boil.
Continue cooking and stirring until the mixture reaches 285°F (140°C) for chewy toffee. This is the critical step that determines texture – going higher will create harder toffee. The mixture will turn a beautiful amber color as it reaches temperature.
Remove from heat immediately when target temperature is reached and quickly stir in the vanilla extract. Be careful as the mixture may bubble up slightly.
Pour the hot toffee mixture onto your prepared baking sheet, spreading it to about 1/4 inch thickness with your spatula. Work quickly as it will begin to set.
If adding chocolate topping, sprinkle the chocolate chips evenly over the hot toffee. Let sit for 2-3 minutes until they begin to melt, then use a spatula to spread the chocolate into an even layer.
Immediately sprinkle with chopped nuts and/or festive sprinkles while the chocolate is still warm so they adhere properly.
Allow the toffee to cool completely at room temperature for about 2 hours, or speed up the process by placing it in the refrigerator for 30 minutes.
Break or cut the toffee into irregular pieces or neat squares, depending on your preference.