Rishi Sunak’s wife has been forced to change her tax status, announcing that she would pay UK taxes on all of her income after the chancellor had defended her “non-dom” status.
Sunak has faced harsh criticism from MPs and tax experts over the revelation this week that his wife, Akshata Murty, held non-domiciled status in the UK, allowing her to earn money abroad without paying UK tax for up to 15 years.
Murty announced on Friday evening that she would now pay UK tax on all of her worldwide earnings out of a “British sense of fairness”, acknowledging that the past two days of criticism into her tax affairs had become a “distraction” for her husband.
Murty owns a stake worth more than £500mn in Indian technology company Infosys, which was founded by her father. She received £11.6mn in dividend income from Infosys last year.
Murty said on Friday that while her tax arrangements had been “entirely legal . . . it has become clear that many do not feel it is compatible with my husband’s role as chancellor”.
Sunak was also forced to respond to media reports on Friday that until last October he had held a US green card, an American permanent residence document that requires holders to file US tax returns. His spokesperson confirmed that he had remained a green card holder for six months after becoming chancellor, saying: “All laws and rules have been followed.”
Asked about Sunak’s green card at a press conference on Friday, prime minister Boris Johnson said: “As I understand it the chancellor has done absolutely everything he was required to do.”
Sunak was widely considered the favourite candidate to succeed Johnson if the prime minister was forced to resign over the “partygate” scandal, but the chancellor’s political standing has tumbled following last month’s Spring Statement when he was accused of not doing enough to help poorer households struggling with the cost of living crisis.
Senior Conservatives have said they believe the prime minister’s allies were behind some of the negative comments regarding Murty’s tax status, but Johnson denied the claims, saying: “If there are such briefings they are not coming from us in Number 10.”
However, one senior MP said they were “99 per cent” certain the prime minister’s office was involved, while another said they suspected Sunak was in “a lot” of trouble because “it’s Number 10 going for him”.
An Ipsos Mori poll taken this week showed Sunak’s net popularity had dropped to -18, the lowest since he became chancellor.
Opinion within the party was split on whether the scandal over his tax arrangements and revelations about his green card had ended his leadership hopes.
One well-placed Tory party insider said: “I wasn’t expecting Rishi’s demise to be so quick.” But another influential MP said while they did not think the issue was “fatal”, it “chips away at his credibility”.
On Thursday Sunak defended his wife, branding the criticism of her tax arrangements as “unpleasant smears”. He said that Murty “loves her country like I love mine” and “to smear my wife to get at me is awful”.
He added that Murty was “100 per cent doing everything this country asks of her” in terms of following the law and paying taxes.
This week, her spokesperson said that as a citizen of India, she was unable to hold citizenship of another country, “so, according to British law, Ms Murty is treated as non-domiciled for UK tax purposes”.
But several tax experts said the explanation that Murty’s non-dom status was based on her Indian citizenship was “disingenuous”, pointing out that she would have actively chosen to be a non-dom for tax purposes.
Sir Keir Starmer, the opposition Labour leader, said Sunak had “very serious questions to answer” about his wife’s tax affairs. “We need complete transparency on this so that we can all understand what schemes she may have been using to reduce her own tax,” he said.
An ally of Sunak said the chancellor was taken aback by the attacks on his wife and felt he needed to defend her. “He just doesn’t think policy should be like this,” they said.
The revelation about his green card prompted further concerns about his openness about his family’s circumstances. One senior Tory MP said the row over Murty’s tax arrangements suggested Sunak had poor political judgment. “This may be legal, but this is essentially all about rich people saving money and that’s what it looks like to my constituents. How many people have £30k spare to spend on trying to save money on taxes? They are living in a totally different world.”
A former minister added that Sunak’s handling of the row had “not gone down well” among MPs. “I care about the arrogant assumption that you shouldn’t have to be transparent or answer these questions honestly.”
But Tobias Ellwood, a Conservative MP, said the current rules relating to non-dom status were “out of date” and should be reviewed.
“There is nothing illegal about what has been done by the chancellor . . . If there are bigger, more fundamental questions about the existence of the non-dom status, that is something for us as a country, perhaps — and indeed parliament — to debate,” he told Sky News.”