Step 1: Prepare a large baking sheet by lining it with parchment paper or a silicone baking mat. Set aside.
Step 2: In a heavy-bottomed medium saucepan, combine the butter, granulated sugar, and water. Cook over medium heat, stirring constantly with a wooden spoon or heat-resistant spatula until the butter is completely melted.
Step 3: Continue to cook the mixture over medium heat, stirring frequently. Clip a candy thermometer to the side of the pan, ensuring the bulb is submerged in the liquid but not touching the bottom.
Step 4: Cook the mixture until it reaches the ‘hard crack’ stage (between 285°F and 300°F). The mixture will turn a deep golden amber color. This usually takes 10 to 15 minutes of boiling.
Step 5: Immediately remove the pan from the heat and stir in the vanilla extract. Be careful, as the mixture may bubble up slightly.
Step 6: Carefully pour the hot toffee onto the prepared baking sheet. Use a spatula to spread it into an even layer, approximately 1/4 inch thick.
Step 7: Let the toffee sit for 1-2 minutes, then sprinkle the chocolate chips evenly over the surface. Wait another minute for the chocolate to melt, then spread it into a smooth layer using an offset spatula.
Step 8: Sprinkle the chopped nuts over the melted chocolate and gently press them down so they adhere. Allow the toffee to cool completely at room temperature (about 2 hours) or in the refrigerator for faster setting.
Step 9: Once fully set and hardened, break the toffee into pieces by hand or with a knife. Store in an airtight container.