Chancellor Rishi Sunak’s wife Akshata Murty has bowed to pressure and announced that she will pay UK taxes on her overseas income following intense controversy over her non-domicile status.

       She insisted that the contentious non-dom arrangement had been “entirely legal” – but said it “has become clear that many do not feel it is compatible with my husband’s role as chancellor”.

       In a statement on Friday evening, Ms Murty said: “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 added: “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.”

       It comes as The Independent revealed that Mr Sunak had been listed as a beneficiary of tax trusts British Virgin Islands and Cayman Islands while setting taxes in the UK as chancellor.

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       And Mr Sunak also admitted holding a US green card while he was chancellor between February 2020 and October 2021 – paying tax in the States while setting UK tax policy.

       Labour said the chancellor’s admission that he held a US green card for the first 19 months of his time in the post only “begs further questions”.

       Pat McFadden, shadow chief Treasury secretary, said: “Why did he keep a green card for so long while being a UK MP? Was there any tax advantage in doing so? And why did he give this up after holding it for so long?”

       Labour also demanded “urgent answers from the chancellor as to why he has been linked to a tax haven” following The Independent’s exclusive report.

       Sir Keir Starmer’s party also said “far too many troubling questions” remain about Ms Murty’s use of non-dom status. “Will she agree to paying back all the tax she saved through the arrangement?” said a Labour spokesperson.

       The chancellor’s wife said she was rearranging her affairs “because I want to, not because the rules require me to”, adding that changes would be made immediately, and would be applied to the tax year just finished.

       Ms Murty, who has reportedly received ￡11.6m in dividends from an Indian IT giant firm founded by her father over the past year, had paid ￡30,000 to hold non-dom status.

       In her statement, Ms Murty said she had “tried to keep my professional life and my husband’s political career entirely separate” – and remained “proud” of the work of her father’s company.

       She stated: “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.”

       Mr Sunak’s wife said he decision to pay UK tax on her worldwide income “will not change the fact that India remains the country of my birth, citizenship, parents’ home and place of domicile”, before adding: “But I love the UK too … I am so proud to be here.”

       It comes as Boris Johnson denied that he and his No 10 team had been briefing against Mr Sunak – insisting that he had not known anything about the non-dom tax status used by chancellor’s wife.

       Mr Sunak has blamed Labour for the fact that details of his wife’s tax arrangements emerged in The Independent this week – but some of the chancellor’s allies have said they suspect No 10 has been trying to undermine the chancellor.

       The prime minister told a Downing Street press conference: “If there are such briefings, they are not coming from us in No 10 – heaven knows where they are coming from.”

       Backing his under-pressure chancellor, Mr Johnson said: “I think that Rishi is doing an absolutely outstanding job,” adding: “I don’t think people’s families should be dragged into things.”

       Chancellor Rishi Sunak with his wife Akshata Murty

       (PA Archive)

       Earlier, in an interview with The Sun, Mr Sunak said there had been attempts to “smear my wife to get at me”. Asked if he thought Labour was behind a smear campaign, Mr Sunak replied: “Yeah.”

       Labour frontbencher Emily Thornberry, shadow attorney general, asked whether Mr Sunak had broken the ministerial code – which states that sharing the financial status of ministers’ spouses is relevant because “there can be a conflict of interest”.

       On Friday Ms Thornberry suggested that Mr Sunak “didn’t declare it properly”, referring to Ms Murty’s tax status.

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       But the Treasury denied that the ministerial code had been breached. “The chancellor provided a full list of all relevant interests when he first became a minister in 2018, as required by the ministerial code.

       “The Independent Adviser on Ministers’ Interests has confirmed that they are completely satisfied with the steps the chancellor has taken to meet the requirements of the code.”