Sunak's millionaire non-dom wife in tax U-turn as Chancellor faces fierce backlash

9 April 2022, 00:31 | Updated: 9 April 2022, 00:36

Rishi Sunak continues to face public backlash over his financial affairs despite an announcement that his non-domicile wife Akshata Murty will now pay UK taxes on her foreign income.

The Chancellor and his wife have been embroiled in a tax row after it was revealed Ms Murty doesn't pay UK taxes on her overseas income.

In a dramatic U-turn, less than 48 hours after her non-domicile status was revealed, Ms Murty volunteered to pay UK income tax on her worldwide income, despite not being required by law to do so.

She said she was aware that her tax arrangements did not seem compatible with "the British sense of fairness" in a statement released on Friday evening.

Ms Murty, who lives with the Chancellor at 11 Downing Street, said she doesn't want her tax status to be a "distraction" for her husband.

She will retain her Indian citizenship and her non-domicile status.

Ms Murty said it has become clear that "many do not feel it is compatible" with her husband's role as Chancellor of the Exchequer.

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"I understand and appreciate the British sense of fairness and I do not wish my tax status to be a distraction for my husband or to affect my family," she said.

"In recent days, people have asked questions about my tax arrangements: to be clear, I have paid tax in this country on my UK income and international tax on my international income.

"This arrangement is entirely legal and how many non-domiciled people are taxed in the UK. But it has become clear that many do not feel it is compatible with my husband’s role as Chancellor.

"For this reason, I will no longer be claiming the remittance basis for tax. This means I will now pay UK tax on an arising basis on all my worldwide income, including dividends and capital gains, wherever in the world that income arises. I do this because I want to, not because the rules require me to."

The new arrangements will begin immediately and will also be applied to the tax year just finished.

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It comes as Mr Sunak admitted he held a US green card for 19 months while he was Chancellor, but insists all laws were followed.

Green card holders must pay US tax on their global income and they must make America their permanent home.

Mr Sunak filed US tax returns, the chancellor's spokeswoman said, "but specifically as a non-resident, in full compliance with the law".

Labour's deputy leader Angela Rayner accused the Chancellor of "swerving questions and switching tax codes even faster than bills are going up".

"When the Chancellor can’t even honestly say which country he lives in how on earth can we trust him with our taxes?" she wrote on Twitter.

Labour said there were still "far too many troubling questions" to be answered and called for "full transparency" from Mr Sunak regarding his financial affairs.

A party spokesman questioned whether Ms Murty would use her Indian citizenship and a treaty with the UK dating back to the 1950s to avoid paying inheritance tax - move which could reportedly save tens of millions of pounds.

"This urgently matters because the Chancellor - the person in charge of our tax system and responsible for loading working people with the highest tax burden in 70 years - will still benefit from Ms Murty's tax arrangements," the spokesman said.

"Any further obfuscation cannot be tolerated, and it would be beyond shameful of the Chancellor if he does attempt to do so."

Boris Johnson has said Rishi Sunak did not tell him his millionaire wife held non-domicile status but denied any briefings designed to undermine the Chancellor are coming from No10.

Allies of Mr Sunak reportedly suspect No 10 of seeking to undermine him through hostile briefings amid tensions over last month's Spring Statement when he was accused of failing to support families struggling with the cost-of-living crisis.

However Mr Johnson said: "If there are such briefings they are not coming from us in No 10 and heaven knows where they are coming from. I think that Rishi is doing an absolutely outstanding job."

Mr Sunak has defended his wife's non-dom status and accused opposition MPs of "smearing" his wife to get at him.

On Thursday, he said: "Every single penny that she earns in the UK she pays UK taxes on, of course she does.

"And every penny that she earns internationally, for example in India, she would pay the full taxes on that.

"That is how the system works for people like her who are international who have moved here."

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The Chancellor's wife has come under fire for allegedly dodging millions of pounds of tax, with Labour leader Sir Keir Starmer calling the situation "breathtaking hypocrisy".

The Indian-born millionaire, who met the Chancellor at university, said she has tried to keep her professional life and her husband's political career entirely separate.

She said Mr Sunak has not involved himself in her business affairs, and she has left politics to him.

"Rishi has always respected the fact that I am Indian and as proud of my country as he is of his," she said.

"He has never asked me to abandon my Indian citizenship, ties to India or my business affairs, despite the ways in which such a move would have simplified things for him politically.

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"He knows that my long-standing shareholding in Infosys is not just a financial investment but also testament to my father's work, of which I am incredibly proud."

She added that her decision to pay UK tax on all her worldwide income will not change the fact that India remains her country of birth, citizenship, parents’ home and place of domicile.

"But I love the UK too. In my time here I have invested in British businesses and supported British causes. My daughters are British. They are growing up in in the UK. I am so proud to be here."