April 8 (Reuters) – Akshata Murthy, the wife of British Finance Minister Rishi Sunak, said on Friday she would stop avoiding British tax on her foreign income – bowing to pressure her husband had previously dismissed as a political defamation.

Public anger over Murthy’s tax status has been heightened by her husband’s decision to hike payroll taxes at a time when soaring inflation leaves Britons facing the biggest cut in the cost of living since the start of recordings in 1956.

Murthy, an Indian citizen, is eligible for so-called ‘non-domiciled’ status in Britain, something available to foreign nationals who do not consider Britain their permanent home. This allowed her to choose to pay UK tax only on income she earned or transferred to Britain.

Murthy is the daughter of one of the founders of Indian IT giant Infosys (INFY.NS) and owns around 0.9% of the company, earning her a dividend payout worth 11. 6 million pounds ($15.1 million) last year.

In a statement on Friday evening, after two days of critical media coverage, Murthy said she would pay UK tax on her aggregate income, including dividends and capital gains, for the 2021/22 tax year and in the future.

“I understand and appreciate the British sense of fairness and I don’t want my tax status to be a distraction to my husband or affect my family,” she said.

Murthy said her previous tax arrangements were “entirely legal” and she would continue to claim India, not Britain, as her home. Sunak previously said she intended to return to India to care for her parents when they become infirm.

Sunak has been touted as the successor to Prime Minister Boris Johnson, whose own position has been called into question after widespread criticism over illegal parties held in Downing Street during the COVID-19 lockdowns and a series of other scandals.

After being applauded for his strong response to the pandemic, Sunak’s ratings have plummeted as he faces challenges on many fronts, with the tax burden set to reach its highest level since the 1940s .

Earlier on Friday, Sunak said in an interview that his wife’s financial investments were kept separate from his own and that questions about his stepfather’s wealth and his wife’s tax arrangements were politically motivated attempts to harm him.

“Trying to smear him, smear my wife to get at me, that’s horrible, isn’t it?” he told The Sun newspaper.

The non-domiciled status exempts more than 75,000 foreign nationals in Britain from overseas income tax, and has been a target for tax campaigners as it massively benefits the very wealthy. Read more

Britain’s opposition Labor Party – which has called for an end to non-domiciled status – said Murthy would also have to repay UK tax she had avoided in previous years if she was sincere in now accepting her arrangements taxes were unfair.

Johnson said he was unaware that Murthy held non-dom status and dismissed suggestions his own office informed against Sunak.

“Rishi is doing an absolutely outstanding job,” he said.

Sunak also confirmed media reports that he only gave up a US “green card” – an immigration status for US permanent residents – after becoming UK finance minister in 2020.

A spokesman for Sunak said he paid his taxes in full and did not break any laws or regulations.

($1 = 0.7672 pounds)

Additional reporting by Kate Holton and Andy Bruce, and Mrinmay Dey and Maria Ponnezhath in Bengaluru; Editing by Angus MacSwan and Daniel Wallis

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