By Kate Holton and William James
LONDON (Reuters) -British finance minister Rishi Sunak faced awkward questions about his wife's finances on Thursday after she confirmed she did not pay UK taxes on her foreign earnings on the same day he hiked taxes for millions of people.
Sunak, a former banker, is married to Akshata Murthy, daughter of Narayana Murthy, the billionaire co-founder of IT services company Infosys. She owns around 0.93% of the company.
Her spokeswoman confirmed late on Wednesday - the day that social security contributions rose for UK workers and employers - that Murthy was treated as non-domiciled for UK tax purposes, meaning she would not pay taxes in Britain on dividends from the Indian business.
"Akshata Murty is a citizen of India, the country of her birth and parent's home," the spokeswoman said in a statement. "India does not allow its citizens to hold the citizenship of another country simultaneously.
"She has always and will continue to pay UK taxes on all her UK income."
Asked about the issue, Prime Minister Boris Johnson said the families of politicians should be kept out of politics, but the opposition Labour Party said Sunak had questions to answer.
Once seen as the favourite to replace Johnson, Sunak has been hit by a string of negative headlines in recent weeks after he hiked taxes and failed to offer fresh support to the poorest as a cost-of-living crisis hit the country.
"Tax hikes for Britons... but not in No. 11?" the Daily Mail said, in reference to the Downing Street address typically reserved for the finance minister. The left-leaning Daily Mirror newspaper described it as a "billionaire's cash break".
Non-dom status exempts more than 75,000 mostly foreign nationals in Britain from tax on overseas income and has been a target for tax campaigners as it overwhelmingly benefits the very rich.
Tax experts said non-domiciled status had to be actively sought by an individual. The classification is only available to residents who claim their 'domicile' - the centre of their personal and financial interests - is outside the United Kingdom.
Tulip Siddiq, a Labour lawmaker and Treasury spokeswoman, said Sunak should say whether he had benefited from his wife's tax status.
A person familiar with the situation said the government and Treasury had been aware of the situation. Murthy pays foreign taxes on her foreign income, the person added.
Sunak, who has also seen his personal poll ratings plunge, is facing challenges on many fronts, with public finances stretched thin and the tax burden due to reach its highest since the 1940s. At the same time inflation is forecast to hit a 40-year high of nearly 9% this year and Britons face the biggest hit to their living standards since records began in the 1950s.
(Reporting by Kate Holton and William James; editing by Richard Pullin, Kirsten Donovan)