It has been reported that the Chancellor Rishi Sunak’s wife, Akshata Murty, does not pay UK tax on foreign earnings by virtue of having non-domicile status.
Being non-domiciled means you live in the UK, but your “permanent home” (domicile) is not in the UK.
Her spokesperson said: "Akshata Murty is a citizen of India, the country of her birth and parents' home.
"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."
It is true that India does not allow people to hold Indian citizenship simultaneously with citizenship of another country.
However, this isn’t relevant to Ms Murty’s non-domicile tax arrangements. She may automatically have non-domicile status because of her family background, but being taxed as a non-domicile is an active choice, which does not happen automatically, and is not directly related to one’s citizenship.
What does it mean to be non-domiciled?
The UK government says that non-domiciled residents (“non-doms”) are those who currently live in the UK but whose permanent ‘homes’ (domiciles) are outside the UK.
A person’s domicile is “usually the country your father considered his permanent home when you were born.”
Ms Murty and her father, the entrepreneur N.R. Narayana Murthy, were both born in India.
What does this have to do with taxes?
If someone is a non-dom, and their foreign income exceeds £2,000, they can choose whether to pay UK tax on that income, or claim the “remittance basis”. This means they only pay UK tax on the foreign income they bring to the UK. (Ms Murty reportedly earned £12 million in dividend income from shares in her father’s India-based company in the year to March 2022).
The foreign income that stays in its country of origin may be taxed according to that country's tax rules.
Some people claiming the remittance basis are required to pay an annual charge of £30,000 or £60,000, depending on how long they have been resident in the UK. Ms Murty's spokesperson confirmed she pays £30,000 per year to claim the remittance basis.
So while being a non-dom was not necessarily a choice for Ms Murty, the decision to be treated as non-domiciled for tax purposes is an active choice. It’s not an automatic consequence of being non-domiciled.
What does this have to do with citizenship?
Being a citizen of another country does not in itself determine non-domicile status. This, as we have said, is usually a question of where your father’s home was when you were born.
The House of Commons Library says: “Domicile is distinct from nationality, residence or citizenship.”
Tax lawyer at Clifford Chance Dan Neidle said: “Note that citizenship is irrelevant. Plenty of foreign citizens live in the UK and pay tax here as normal.”
He added: “That is absolutely a free choice that Mrs Sunak [Ms Murty] had, and she positively chose the remittance basis.”
So being an Indian citizen itself doesn't make you a non-dom. And being a non-dom doesn't mean you automatically get taxed as a non-dom; that only happens if you choose that arrangement.
There is no suggestion Ms Murty’s tax arrangements are anything but legal. There is no suggestion the Chancellor minimised his own tax bill.
Can Ms Murty be a non-dom forever?
From 2017, foreign-born non-doms have been “deemed domicile” in the UK for tax purposes if they have lived in the UK for at least 15 of the previous 20 tax years. For example, if someone with non-domicile status had lived in the UK for 15 continuous tax years, in the 16th year they would be required to pay UK tax on foreign earnings.
Ms Murty has been living in the UK since 2013, so this does not yet apply to her.
Speaking to Radio 4 about the story on 7 April, Business Secretary Kwasi Kwarteng said: “Once she’s lived here for 15 years, the non-domicile status falls away. So that will happen in a few years. I don’t know when.”
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