Rishi Sunak's non-dom wife tonight U-turned and announced she will pay UK tax on her overseas income after a furious backlash.
Akshata Murty owns £700million worth of shares of the Indian IT giant Infosys which was founded by her father.
But she is not thought to have paid UK tax on £11.6m in dividend income from the firm last year.
That is because she is a non-domiciled (non-dom) UK resident - and chooses to pay taxes on foreign income in India, instead of in the UK.
The revelation sparked claims of hypocrisy from the Chancellor's family at a time when he is putting up taxes on Brits. As a non-dom she could have chosen to tax her Indian income in the UK, and did not.
But tonight Ms Murty announced a sharp U-turn, saying: "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 announced she will now pay UK tax on all her foreign income effective immediately and backdated to the last tax year.
In a statement this evening, Ms Murty also said that she has tried to keep her professional life and her husband's political career separate.
She added that "it has become clear that many do not feel it is compatible with my husband's role as chancellor".
She continued: "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. These new arrangements will begin immediately and will also be applied to the tax year just finished (21-22)."
It comes hours after Rishi Sunak claimed the criticism of his wife was a smear by the Labour Party.
Labour had argued his family was benefitting from a status which - while legal - is used mostly by the very wealthy to minimise tax liabilities. Ms Murty had been paying £30,000 a year to maintain her status.
Mr Sunak told The Sun it wasn't fair to ask his wife to sever her ties with India, where she would eventually return to care for her parents.
He said: "She loves her country. Like I love mine, I would never dream of giving up my British citizenship. And I imagine most people wouldn’t.”
Mr Sunak added: “To smear my wife to get at me is awful.”
Asked if he believed his family were victims of a Labour smear campaign, Mr Sunak replied: “Yeah.”
Some Tory MPs have come out in support of Mr Murty's decision, despite Mr Sunak blaming Labour smears.
Tory MP Kevin Hollinrake tweeted: “Whilst all political parties have maintained non-dom status to attract wealth-creators to the UK, nevertheless, this is the right thing to do in the circumstances. Time to move on.”
SNP MP Gavin Newlands tweeted: “Nothing more than a damage limitation exercise.
“The Chancellor's level of disconnect with the public was laid bare with his response to this episode.
“And not because his family is rich. There are many well off people who pay every penny in tax without "managing" their tax affairs.”
Labour MP Justin Madders said: “Is this an admission she should have been [paying UK tax on overseas income] already?”
Tonight's statement from Ms Murty comes hours after Mr Sunak admitted he had a US green card for more than a year while he was Chancellor.
Mr Sunak held the document, which allows people to live and work in America, until his first trip to the US in a Government capacity in October 2021, his spokeswoman confirmed.
He became Chancellor in February 2020. It's understood he gave up the green card in advance of his US trip, possibly in August 2021.
This is six years after he became an MP for Richmond, North Yorkshire.
Holders of green cards are required to pay US tax on their worldwide income - and it carries an obligation to make America your permanent home.
Mr Sunak and his wife, who met at Stanford University, lived in the US previously and are understood to own a holiday home in Santa Monica, California.
Here is Akshata Murty's statement in full
"Since arriving in the UK, I have been made to feel more welcome than I ever could have imagined, in both London and our home in North Yorkshire. This is a wonderful country.
"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. 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.
"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. These new arrangements will begin immediately and will also be applied to the tax year just finished (21-22).
"Until now, I have tried to keep my professional life and my husband’s political career entirely separate. Since Rishi entered parliament, he has not involved himself in my business affairs and I have left politics to him. When I met him we were 24-year-old business school students, living in another country, and had no idea of where life would take us. Rishi has always respected the fact that I am Indian and as proud of my country as he is of his.
"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. He knows that my long-standing shareholding in Infosys is not just a financial investment but also a testament to my father's work, of which I am incredibly proud.
"My decision to pay UK tax on all my worldwide income will not change the fact that India remains the country of my 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."
