Rishi Sunak is facing “very serious questions” over his family’s finances after it emerged that his wife holds the tax-reducing non-domiciled status.
Akshata Murty, estimated to be worth hundreds of millions of pounds, confirmed the arrangement, which means she is not legally obliged to pay tax in Britain on foreign income.
Boris Johnson has refused to comment on the revelation, saying it is important to keep families out of politics “if you possibly can”.
But Labour leader Sir Keir Starmer demanded answers – and said Sunak could be guilty of “breathtaking hypocrisy” if his wife is reducing her own tax bill while he increases national insurance for millions of Brits.
Non-dom status has been criticised by politicians of all stripes for years, with several commentators recalling that George Osborne pledged to crack down on the loophole in 2015.
Sunak’s predecessor as chancellor pledged to end permanent entitlement to non-dom status, which has enabled thousands of wealthy families to live in Britain without paying tax on their overseas income.
Osborne announced that non-dom status would be removed from those who have lives in the UK for more than 15 of the last 20 years, a move aimed to catch out families who have passed the tax perk down the generations.
“British people should pay British taxes in Britain – and now they will,” said Osborne, as he announced the clampdown as part of his 2015 summer budget.
He added: “It is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.”
Ministers lined up to defend Sunak on Thursday morning, with Kwasi Kwarteng defending Murty’s tax arrangements as “in order” and hitting out at scrutiny of her finances as “completely unfair”.
Kwarteng said the Chancellor’s wife pays tax “abroad” but was unable to say where when asked if she pays all foreign tax in India or in a tax haven such as the Cayman Islands.
Asked on BBC Radio 4’s Today programme if Murty is a tax avoider, Kwarteng responded: “I don’t know anything about her tax affairs.
“What I do know is that she has been very clear about the fact she’s an Indian citizen. Once she’s lived here for 15 years the non-domiciled status falls away so that will happen in a few years, I don’t know when. As far as I’m concerned that’s good enough for me and I think we can move on from that story.”
A spokeswoman for Murty confirmed she holds non-dom status after the reports surfaced.
“Akshata Murty is a citizen of India, the country of her birth and parents’ home,” the spokeswoman said. “India does not allow its citizens to hold the citizenship of another country simultaneously.
“So, according to British law, Ms Murty is treated as non-domiciled for UK tax purposes. She has always and will continue to pay UK taxes on all her UK income.”
But Professor Richard Murphy, the Sheffield University academic who co-founded the Tax Justice Network, questioned her statement, insisting that being a non-dom is a “choice” she can relinquish.
“Domicile has nothing to do with a person’s nationality,” he said. “In other words, the claims made in the statement issued by Ms Murty are wrong, and, as evidence, just because a person has Indian citizenship will never automatically grant them non-dom status in the UK.”