ITV News Political Correspondent Shehab Khan looks at the implications for Rishi Sunak and his wife
Rishi Sunak's wife Akshata Murty says she will now pay UK tax on overseas income following criticism of her non-dom status.
Ms Murty, said to be worth hundreds of millions of pounds, has non-domicile status, which means her home is considered outside of Britain and exempts her from paying UK tax on her foreign earnings unless brought into the UK.
Labour attacked Ms Murty's financial arrangements, accusing the chancellor of hypocrisy as his family benefits, while taxes have been raised for millions.
"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," Ms Murty said in a statement on Friday.
“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.”
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The chancellor's wife is a citizen of India, which "does not allow its citizens to hold the citizenship of another country simultaneously", her spokesperson previously said, so under UK law she is "treated as non-domiciled for UK tax purposes".
"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," Ms Murty added.
What is non-domicile status?
UK residents whose permanent home ("domicile") is outside of the UK may not have to pay UK tax on foreign income, according to HM Revenue and Customs (HMRC) guidance.
The same rules apply if you make any foreign capital gains, for example you sell shares or a second home.
"Your domicile’s usually the country your father considered his permanent home when you were born," states the government guidance.
"It may have changed if you moved abroad and you do not intend to return."
What tax do you pay if you have non-dom status?
According to HMRC, you do not pay UK tax on your foreign income or gains if they’re less than £2,000 in the tax year, or you do not bring them to the UK, for example by transferring them to a British bank account.
However, the government states you must report foreign income or gains of £2,000 or more, or any money that you bring to the UK.
You can then either pay UK tax on them, or claim the "remittance basis" which means you only pay UK tax on the income or gains you bring to the UK, but:
You can lose tax-free allowances for Income Tax and Capital Gains Tax
Or pay an annual charge of £30,000 if you have been a UK resident for at least seven of the previous nine tax years, and £60,000 for at least 12 of the previous 14 tax years.
However, if you work in both the UK and abroad, you don't have to pay tax on foreign income or gains - even those brought to the UK - if you are entitled to a "foreign workers' exemption".
You only qualify for an exemption if:
your income from your overseas job is less than £10,000
your other foreign income (such as bank interest) is less than £100
all your foreign income has been subject to foreign tax (even if you did not have to pay, for example because of a tax-free allowance)
your combined UK and foreign income is within the band for basic rate Income Tax
you do not need to fill in a tax return for any other reason