Rishi Sunak faces questions over wife Akshata Murty's non-dom tax status

Rishi Sunak said it was wrong for people to criticise his wife Akshata Murty

Chancellor Rishi Sunak is facing calls to "come clean" on his family's financial affairs after it emerged his wife benefits from a tax-saving scheme.

Akshata Murty has non-dom status, meaning she does not have to pay UK tax on income earned abroad.

Ms Murty earns money from shares in an Indian software giant founded by her billionaire father.

Her spokeswoman said she paid all tax due in the UK - but Labour called for "complete transparency".

Under the rules, people can be granted non-dom status if they live in the UK but intend to return to their home country.

Ms Murty is an Indian citizen and has retained family ties to India. The BBC understands she has said she would eventually like to return there.

If she lived in the UK for 15 years she would automatically lose her non-dom status, under the rules, but she has declined to say when it came into effect.

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Labour leader Sir Keir Starmer said Mr Sunak had "very serious questions to answer" about his family's finances.

"If it now transpires that his wife has used schemes to reduce her tax, while he's been increasing taxes on working people, that's breathtaking hypocrisy," said Sir Keir.

It "just goes to show just how out of touch this chancellor is" at a time when taxes are increasing for millions of workers, he added.

Labour has written to the chancellor demanding to know if he has benefited from Ms Murty's tax status.

Liberal Democrat Treasury spokesperson Christine Jardine said: "Sunak now needs to come clean about which country his family pays tax in abroad and if it is a tax haven."

The Lib Dems have urged Mr Sunak to ban the partners of ministers from claiming non-dom status, calling it a "loophole".

But Business Secretary Kwasi Kwarteng defended Mr Sunak, saying it was "completely unfair" to scrutinise the tax affairs of Ms Murty, "who is not a politician".

He also rejected opposition claims that she was "sheltering" from UK taxes.

He told BBC Breakfast: "I think she's been very clear, she's been very transparent, the chancellor's been very transparent, and this non-dom status has been part of the UK tax system for more than 200 years."

When asked about the criticism of Mr Sunak over his wife's tax affairs, Prime Minister Boris Johnson said: "I think it's very important in politics to keep people's families out of it.".

Last week, Mr Sunak told the BBC it was "very upsetting" to see his wife being criticised in the media, as she was not an elected politician.

What is a non-dom?

A non-dom is a UK resident who declares their permanent home, or domicile, outside of the UK.

A domicile is usually the country his or her father considered his permanent home when they were born, or it may be the place overseas where somebody has moved to with no intention of returning.

For proof to the tax authority, non-doms have to provide evidence about their background, lifestyle and future intentions, such as where they own property or intend to be buried.

Non-domiciled tax status was introduced in 1799 to protect colonial investments during the time of the British Empire. Those who have it must still pay UK tax on UK earnings but do not need to pay UK tax on foreign income. They can give up their non-dom status at any time by stating on your tax return that you intend to live in the UK and wish to be considered British for tax purposes.

Ms Murty has chosen to be domiciled in India via her father, the billionaire Narayana Murty, which means she doesn't need to pay taxes in the UK on dividends she receives from her stake in her dad's company, thought to be worth hundreds of millions of pounds.

Non-dom status has been a frequent source of political controversy.

Wealthy Conservative politicians, such as former party chairman Lord Ashcroft and environment minister Lord Goldsmith, have faced criticism over claiming it, although Lord Goldsmith has now given up his non-dom status.

Ms Murty confirmed her non-dom status after it was reported by the Independent website on Wednesday.

"Akshata Murty is a citizen of India, the country of her birth and parents' home," her 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 tax experts have questioned her statement, suggesting that non-dom status is a "choice" that people can give up.

"Domicile has nothing to do with a person's nationality," said Professor Richard Murphy, co-founder of left-wing campaign group the Tax Justice Network.

He added: "Just because a person has Indian citizenship will never automatically grant them non-dom status in the UK."

Ms Murty was born in India in 1980 and holds an Indian passport.

In 2009, she married Mr Sunak, who became the MP for Richmond, North Yorkshire, in 2015. The couple, who have two daughters, have a flat in Downing Street, and own a number of properties in the UK including a £1.5m home in his constituency, and a property in Santa Monica, California.

Ms Murty's father founded the IT services company Infosys which has grown to be one of India's biggest firms. She owns a little under 1% of its shares, worth more than £500m. She also has interests in several companies in the UK.

Last month the Telegraph reported Ms Murty would have received £11.6m in dividends from Infosys in the past tax year. Her non-dom status means she would not have had to pay UK tax on those dividends, which is currently charged at a rate of 39.35%.

Indian tax authorities say dividend income is taxable at the rate of 20% for non-residents unless they qualify for any deductions. But the dividend rate can come down to 10% for people who are eligible to benefit from the UK's tax treaty with India.

Asked if Ms Murty paid tax on her Infosys dividend payments in India, her representative said "international tax" was paid on her "international income".

It is not clear, however, whether she pays tax on her dividend income in India or another jurisdiction.

In its letter to Mr Sunak, Labour asked if his wife pays all foreign tax in India or in a tax haven such as the Cayman Islands.

Mr Sunak made the Cabinet Office aware of his wife's tax status as part of his declaration of interests when he first became a government minister in 2018.