Rishi Sunak was recused from policy talks on the scrapping of the non-dom tax status – previously enjoyed by his wife – to avoid a “potential or perceived” conflict of interest, Downing Street has said.
Work on the measure was delegated to Deputy Prime Minister Oliver Dowden to carry out with the Chancellor, it is understood.
Jeremy Hunt announced in the spring Budget that the status for wealthy overseas UK residents would be abolished, putting the £2.7 billion a year raised as a result towards tax cuts.
The move will be seen as a bid to pile pressure on Labour, which has long backed the measure as a key plank of policy.
A Number 10 spokesperson said: “There are established processes whereby arrangements can be put in place to mitigate against potential or perceived conflicts of interest.
“The Prime Minister was recused from all policy development and was only sighted on the policy once final decisions had been taken.”
Non-dom status allows foreign nationals who live in the UK, but are officially domiciled overseas, to avoid paying UK tax on their overseas income or capital gains.
Mr Sunak’s family finances have come under scrutiny in the past after it emerged that his wife, Akshata Murty, has previously enjoyed non-dom status.
Ms Murty, the daughter of the billionaire co-founder of Indian IT giant Infosys, declared she would pay UK taxes on all her worldwide income following the controversy.
Opponents have previously criticised the couple over their vast wealth – estimated to be about £529 million according to 2023’s Sunday Times Rich List – and used it to suggest the Prime Minister is out of touch.
Critics have also linked his earlier refusal to scrap the non-dom status to a benefit it previously conferred on his family – attacks which Mr Sunak has dismissed as “smear” tactics.
The current regime will now be replaced with new rules from April 2025, Mr Hunt announced on Wednesday, saying those with the “broadest shoulders” will pay more.
From 2025, new arrivals to the UK will not pay any tax on foreign income and gains for their first four years of residency, but those who continue to live in Britain after that will pay the same tax as other UK residents.
The move causes a headache for Labour, which called for the “loophole” to be closed and said it would use the money to help fund the NHS and schools.