Akshata Murty, the wife of Chancellor Rishi Sunak, has sensationally confirmed she will pay tax on her overseas income after a monumental public backlash over her non-domicile tax status.

Ordinary taxpaying citizens and small business owners were stunned to learn Mr Sunak’s billionaire heiress wife claims non-domiciled status for tax purposes while the Chancellor presided over Britain’s biggest tax hike since the 1940s.  

Ms Murty has legally avoided paying a huge UK tax bill by paying £30,000 a year to register as based in India, as her husband insisted she hasn’t ‘done anything wrong’ while accusing his critics of ‘smearing her to get at him’. 

Tax experts said last night the status could ultimately be worth as much as £300million to the Sunak family. 

But the Chancellor’s wife tonight confirmed she will retain her non-dom status and Indian citizenship, which allows her family to avoid paying inheritance tax in the UK.

She said that while her tax arrangement had been legal, mounting public fury ensured ‘many do not feel it is compatible with my husband’s role as chancellor’. 

‘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 added. 

Akshata Murthy, whose father is one of India 's richest men, is facing scrutiny after it emerged she has kept non-dom status despite living in 11 Downing Street with Rishi Sunak and their children. They are pictured together last month

Rishi Sunak was hit by a political backlash over the news that his heiress wife Akshata Murty is domiciled in India for tax purposes

Akshata Murthy arriving at Downing Street

Ms Murty, (pictured outside Downing Street last month) who is wealthier than the Queen as heiress to her father’s IT firm, had been registered as non-domiciled for UK tax purposes, a legal way to avoid paying taxes in Britain on overseas income 

This is the extraordinary web of homes and businesses with links to Rishi Sunak and his wife Akshata, a heiress to a billion dollar fortune

This is the extraordinary web of homes and businesses with links to Rishi Sunak and his wife Akshata, a heiress to a billion dollar fortune

The Chancellor’s hopes of being Prime Minister have been badly damaged by the revelation that his wife Akshata Murty, who lives with him and their two children in Downing Street and moved to the UK permanently in 2013, is probably paying more tax abroad. 

As the Daily Mail reported this week, his popularity ratings have dropped 24 points since the Spring statement, while a YouGov survey found more than half of Britons view him ‘unfavourably’. 

Ms Murty, who is wealthier than the Queen had used the legal tax scheme to avoid paying HMRC on her overseas income. The status is often used by the super-wealthy to save thousands or even millions of pounds in tax. 

In a short statement Akshata, worth £200million more than a year ago, insisted she pays taxes on all UK income and said the set-up is required because she is an Indian citizen. But a number of tax and accounting experts have disputed this. 

Ms Murty was born in India so UK Government rules allow her to list that country, rather than the UK, as her permanent residence, meaning different tax rules on foreign earnings apply.

The arrangement means her permanent home is considered to be outside the UK despite the Sunaks living in Downing Street.

Ms Murty pays an annual levy of £30,000 to the UK Government to keep her non-dom status, her spokesman confirmed.

The status will automatically cease once she has resided in Britain for 15 years, which will be in 2028.

The bulk of Akshata’s wealth comes from Infosys, the Bangalore-based IT firm founded by her now billionaire father. 

Chancellor Rishi Sunak has found himself at the centre of a major row over his family finances this week

Chancellor Rishi Sunak has found himself at the centre of a major row over his family finances this week

Ms Murty is the daughter of billionaire NR Narayana Murthy. She are Rishi Sunak are pictured with her father and mother Sudha Murthy in Bangalore at their wedding reception in 2009

Ms Murty is the daughter of billionaire NR Narayana Murthy. She are Rishi Sunak are pictured with her father and mother Sudha Murthy in Bangalore at their wedding reception in 2009

What is ‘non-dom’ status and how does it help millionaires? 

A non-dom tax status typically applies to someone who was born overseas, spends much of their time in the UK but still considers another country to be their permanent residence or ‘domicile’.

In Akshata Murty’s case, she would need to be claiming that the UK is not her permanent residence.

Citizenship of an individual living in the UK is irrelevant when it comes to non-dom status as it is possible for a UK citizen, or someone born in the UK, to claim they are a non-dom.

According to Home Office guidance: ‘A person can change nationality without it affecting their domicile, or could acquire a change of domicile whilst retaining their original nationality.

‘The fact that a person has acquired a new nationality can be a relevant factor in showing a change of domicile, but is not conclusive, depending upon the reasons for the change. If a person gives up their former nationality it may suggest a change of domicile.’

Status is not given automatically because an individual must apply for the exemption in their tax status when filling out their UK tax return.

According to the Government, a person’s domicile is usually the country where their father considered his permanent home when the individual was born.

In Ms Murty’s case, she was born in India, so she ticks the first box for claiming she is not domiciled in the UK.

Others can also inherit their domicile from their parents, meaning they can still be born in the UK but have non-dom status.

When evaluating someone’s domicile, the taxman will consider a number of factors, including permanent country of residence and how long an individual intends to stay in the UK.

When it comes to tax, the rules state that you do not pay UK tax on foreign income or gains if they are less than £2,000 a year and you do not bring them into the UK.

If you earn more than £2,000 from overseas or bring any money into the UK you must pay UK tax on it – although this may be claimed back.

Or you can pay an annual charge, depending on how long you have been in the UK.

The charges are £30,000 if you have been in the UK for at least seven of the last nine tax years, or £60,000 for at least 12 of the previous 14 tax years.

Therefore, if you are resident in the UK but a citizen of another country, you must still pay a fee.

For high net-worth individuals, many will opt for the yearly charge because the income received from foreign businesses and investments is likely to lead to a far higher tax bill.

It is reported she holds a 0.91 per cent stake, around 39million shares, worth about £727million. Experts say this is  an increase of more than £200million compared to a year ago, due to a jump in the share price during the pandemic. 

But her non-dom status meant she was not liable for UK tax at a rate of 39.35% on her foreign investments, including dividends from her father’s company that reportedly came to £11.6million last year. That sum could have meant paying £4.4million to HMRC, according to The Times. 

India sets the rate for non-residents at 20 per cent, but this can fall to 10 per cent for those who are eligible to benefit from the UK’s tax treaty with India. Public records show Infosys has received more than £50million in UK public sector contracts since 2015.

Akshata also owns other investments, including a business that funnels investments through Mauritius. 

International Market Management is funding the expansion of franchise restaurants in India, including Jamie Oliver’s Italian chain that failed in the UK and US burger brand Wendy’s. This entirely legal structure allows them to reduce taxes paid in India.

The couple have at least four properties. A £1million flat in Kensington, a nearby mews house worth £7million and a £2million mansion in Rishi’s Yorkshire constituency, where he is nicknamed the ‘Maharaja of the Dales’. They also have a £5.5million penthouse in California, overlooking Santa Monica pier, which they use in the holidays.

Mr Sunak had insisted Ms Murty had done nothing wrong by choosing the arrangement exempting her from paying tax in the UK on foreign income.

He blamed Labour for the ‘awful’ response, but his allies told newspapers they suspect No 10 of trying to undermine the Chancellor, who is seen as the favourite to succeed Boris Johnson in any leadership challenge.

Ms Murty, who married the Chancellor in 2009, confirmed she holds non-dom status after the Independent website revealed the arrangement on the day a national insurance hike hit millions of workers.

In an interview with The Sun, Mr Sunak said: ‘To smear my wife to get at me is awful. 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.’

Mr Sunak said his wife was entitled to use the non-dom arrangement as she is an Indian citizen and plans to move back to her home country to care for her parents.

He insisted she is not attempting to pay less tax, saying ‘the dates don’t make a difference’, amid speculation she potentially avoided up to £20 million in UK tax.

Asked if he thought his family were victims of a Labour smear campaign, Mr Sunak replied: ‘Yeah.’

But a Labour source responded: ‘The Chancellor would do better to look a little closer to home.

‘It’s clear that No 10 are the ones briefing against Rishi Sunak and, after his failure to tackle the cost-of-living crisis, you can understand why.’

Shadow attorney general Emily Thornberry today accused Ms Murty of ‘taking advantage’ of her decision to claim non-domicile status to avoid paying taxes.

The politician told BBC Radio 4’s Today programme: ‘In the end, we have somebody who’s been living here for eight years, raising her children here, living at … Downing Street in accommodation provided by the taxpayer and aspiring to be the wife of the next Prime Minister, and yet she says that she isn’t a permanent resident of this country.’

However minister Greg Hands today suggested that there could be a racial element to the criticism, telling the BBC: ‘Some of the commentary about her being a foreign national has been unpleasant.’

The Chancellor himself is said to have four cars, including a high-spec Range Rover costing about £94,000, a top-of-the-range Lexus and BMW, both kept in California – and a more humble Volkswagen Golf, which was the only one he thought to mention in Parliament)

The Chancellor himself is said to have four cars, including a high-spec Range Rover costing about £94,000, a top-of-the-range Lexus and BMW, both kept in California – and a more humble Volkswagen Golf, which was the only one he thought to mention in Parliament)

Green cards allows foreign nationals to ‘live and work permanently’ in the US

The Green Card system is a way the United States allows foreign nationals to live and word permanently in the country without becoming a full citizen.

It is formally known as ‘permanent resident status’ but gained its common name because of the coloured card it was once printed on.

People can gain one through several different routes. As well as relatives of full US citizens, foreign nationals wishing to live and work in the United States can also apply. 

The system is open to those who can demonstrate ‘extraordinary ability in the sciences, arts, education, business or athletics, or … are a multinational manager or executive who meets certain criteria’.

Mr Sunak met his wife at University in California and they lived abroad before Mr Sunak was elected MP for Richmond in North Yorkshire in 2015.

He worked in California, India and Britain for various investment firms including Goldman Sachs.

He later set up his own business in the US, Theleme Partners, in 2010 with an initial fund of £536million.

Once you get a card you are expected to make the US ‘your permanent home’. 

Those with green card status are expected to pay full US taxes on their global earnings, irrespective of taxes he would pay in the UK or elsewhere.

It means he would not have saved money, rather he would have had to pay tax twice on some of his income, in the US and the UK.  

Ms Murty, 42, was forced to make an embarrassing climbdown yesterday over initial suggestions that her non-dom status was an automatic product of her Indian citizenship. A spokesman acknowledged that she had taken a ‘decision’ to apply for non-dom status, for which she pays a flat fee of £30,000 a year.

It comes as Rishi Sunak admitted he held a US Green Card for more than 18 months after becoming Chancellor but insisted he followed ‘all laws and rules’ and later gave up the status after seeking advice upon his first official trip to America. 

The multi-millionaire has found himself at the centre of a major row over his family finances this week, which has threatened to imperil his hopes of one day becoming prime minister.

The scrutiny of Mr Sunak’s financial affairs has included the revelation his wife, Akshata Murty, is living in Downing Street while having non-dom tax status.

But senior Tories and Labour have also rounded on the Chancellor after it was revealed he held a Green Card for more than a year into his term leading the Treasury. 

While the status would not have saved him any money it would have bestowed on Mr Sunak – one of the most senior members of the British Government – a responsibility to make the United States ‘your permanent home’.

The day after Sky News uncovered the revelation about Mr Sunak’s Green Card, a spokeswoman confirmed it had been the case that the Chancellor still held the status for a period while in charge of the Treasury.

‘Rishi Sunak had a Green Card when he lived and worked in the US,’ the spokeswoman said.

Tory backbenchers who had been relaxed about Ms Murty’s tax status suggested his Green Card raised issues about Mr Sunak’s long-term plans.  

One told MailOnline it was ‘a problem’ that fed into growing backbench unease about the Chancellor.

‘He has moved from being ”Dishy Rishi” to ”Fishy Rishi”,’ they said.

They cited four ongoing issues: a lack of support for the PM over Partygate – including not appearing with him in the Commons: an absence of subtlety in his desire to be the next prime minister; suspicions that an incriminating photo of Boris Johnson drinking in the No10 garden came from the Treasury, and the Green Card.

‘Colleagues are generally going off him, they just don’t like him,’ the MP said.

‘He’s been trying a bit too hard to be on manoeuvres, his absence when Boris needed support was noticeable.’ 

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