Akshata Murty, wife of Britain's finance minister Rishi Sunak, announced Friday she will start paying UK tax on "all worldwide income,"  amid controversy over her non-domiciled status.

Sunak has accused critics of mounting a "smear" campaign against his wealthy Indian wife, whose substantial foreign earnings have been shielded from UK taxes.

The Labour opposition has accused Sunak of "breathtaking hypocrisy" after he raised taxes on ordinary Britons in the middle of a cost-of-living crisis.

In a statement, Murty, daughter of Indian billionaire N. R. Narayana Murthy, said she did not want her non-domiciled status to be a "distraction" for her husband.

"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".

Murty stressed that she was making the change "because I want to, not because the rules require me to", adding that the new arrangements will begin "immediately".

The Guardian neswspaper estimated that Murty has received 54.5 million pounds ($71 million) in dividends from the family company Infosys since 2015. Her status allowed her to avoid paying 20 million pounds of tax to the British exchequer, the paper said.

Earlier her husband, the chancellor of the exchequer, told Friday's edition of The Sun newspaper that "to smear my wife to get at me is awful".

Sunak, once a leading contender to succeed Prime Minister Boris Johnson, has seen his popularity plummet in recent weeks as consumer prices surge across the board.

- 'She loves her country' -
The Independent revealed that Sunak was listed among the beneficiaries of trusts in the British Virgin Islands and the Cayman Islands, two tax havens. 

This has fuelled criticism from the opposition that the Conservatives are taking advantage of the system for their own convenience, ignoring the rules imposed on others.

Speaking before his wife's announcement Sunak told The Sun "it would not be reasonable or fair to ask her to sever ties with her country because she happens to be married to me". 

"She loves her country. Like I love mine," he said, adding that "every single penny she earns in the UK she pays UK taxes on".

A person's domicile is usually the country which their father considered his permanent home when the person was born, although this can change if the person plans to permanently live in Britain.

Murty is legally entitled to claim the status, but she had  ultimately declaring that the UK -- the country in which her husband holds the second-most important political office -- is not her permanent home.

And contradicting Sunak, tax lawyers had noted that Murty could still pay taxes in Britain on her global income without renouncing her Indian citizenship.

Allies of the finance minister told the Daily Telegraph newspaper that they believed Johnson's office was behind damaging recent leaks.

They said the prime minister believed Sunak had not backed him strongly enough during an ongoing scandal into Downing Street lockdown parties.

Johnson denied knowledge of any briefing operation against Sunak, and told reporters that his chancellor was doing an "absolutely outstanding job".

"And I don't think people's families should be dragged into things," he said.

A recent YouGov poll showed Sunak's rating falling by 24 percentage points over the past two weeks, following a budget statement that was criticised for ignoring the plight of struggling Britons.