Reality Check: Is it legal to tax old people more?

In November, the man who holds the UK's purse-strings will announce how the nation's money will be spent in the year ahead. And rumours have begun flying about potential cuts and giveaways in the pipeline.

Among these, Chancellor of the Exchequer Philip Hammond is rumoured to be planning a reduced rate of National Insurance for young people, while cutting older people's pension relief.

The plans to redistribute wealth across the generations were mooted by Whitehall sources, .

Pension relief is a system in which the more you pay into a pension, the more money you can get back as a tax relief from government.

We don't know exactly how this policy - were it to be announced - would work, or which ages would benefit.

But at 成人快手 Reality Check, we wanted to know - can you make someone pay more tax just because they're older?

'Tax on age'

The short answer is yes - there are lots of instances of people paying more or less tax, based on their age.

It may be discrimination, but it's not illegal.

Until last year, people over the age of 65 were allowed to keep more money tax-free, and it's still the case that UK workers reaching state pension age no longer have to make National Insurance contributions.

You can also be paid a lower minimum wage if you are younger. There are four different minimum wages depending on your age, from 拢4.05 an hour for under-18s, increasing to 拢7.50 for over-25s.

These variations don't count as age discrimination in law, and are allowed in the UK system of tax and earnings.

It wouldn't be too difficult to implement either.

Economic justification

But does it make sense to do so?

There is very little economic justification for allowing young people to pay a reduced National Insurance rate according to a spokesman for independent think tank, the Institute for Fiscal Studies (IFS).

The IFS says government usually has one of two main aims when reducing taxes for a particular group:

  • to change their behaviour
  • to distribute money more fairly

If the aim is to change behaviour - in the case of National Insurance contributions, probably to encourage people to enter or stay in the workplace - certain groups are more "responsive" to tax cuts than others.

Tax cuts for people nearing retirement age, or mothers with school-age children, are more likely to get them to stay in work, according to the IFS.

But young people without dependants are less likely to work more because they are being taxed less.

'Blunt tool'

If changing how the wealth of the country is distributed is the aim, this is a very blunt tool, the IFS says.

It would be better to address the root problems facing young people like the housing market or student debts, according to Julian Jessop at the Institute for Economic Affairs.

He says this system could mean young City workers on six-figure salaries could pay less tax than NHS workers in their 50s.

It could also create an unfair system whereby women who take career breaks when they are younger in order to have children don't benefit from tax breaks in their 20s, but end up paying more tax later in life.

Instead of putting more money in young people's pockets via tax cuts, government could introduce a new form of pension tax relief favouring the young, according to Tom McPhail, head of policy at financial services company Hargreaves Lansdowne.

This could mean the government "tops up" young people's pensions by a larger amount than older people's pensions.

But this may not have the same political capital as a giveaway for young people that they can feel immediately in their pay packets.