British Prime Minister Rishi Sunak on Sunday fired Conservative party chairman Nadhim Zahawi after an inquiry into Zahawi's tax affairs found a "serious breach" of ministerial rules, the government said.

"As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government," Sunak wrote in a publicly released letter to his Iraqi-born ally, following a scandal that cast doubt on the premier's own judgement and vows of integrity.

The government also released the inquiry report by Sunak's newly appointed independent ethics advisor, Laurie Magnus.

Magnus pulled no punches in finding that Zahawi effectively lied to successive Conservative leaders when he came under investigation by the UK's tax authority, which led to the politician handing over a fine for late payment reportedly worth £5 million ($6.2 million).

Zahawi gave shifting explanations in the affair, and initially tried to silence journalists and a tax consultant with threats of libel lawsuits.

Sunak's decision to dismiss Zahawi, rather than invite him to resign with some saving of face, underlined the serious political stakes at play at a time when millions of Britons are struggling to pay the bills.

Sunak appointed Zahawi as Conservative party chairman, and cabinet minister without portfolio, when he entered 10 Downing Street in October, when he vowed to deliver "integrity, professionalism and accountability at every level".

Zahawi was previously in the cabinet under both Liz Truss and Boris Johnson -- who appointed him as chancellor of the exchequer, in ultimate charge of the UK tax agency.

The opposition Labour party said Sunak should have fired Zahawi immediately when the allegations emerged in newspaper reports this month, rather than seeking to buy time by asking Magnus to investigate.

The scandal underlined that Sunak was a "weak" prime minister, senior Labour MP Bridget Phillipson told Sky News.

"The stench of sleaze just hangs around the Conservative party," she said.

Sunak has faced questions himself about his family's tax affairs after it emerged that his Indian wife Akshata Murty had for years enjoyed "non-domicile" status, which shielded her from paying UK taxes on her overseas income from her family's Infosys business group.

And last week he apologised for receiving his second police fine, after he was filmed not wearing a seatbelt in the back seat of a moving car.

As chancellor himself under Johnson, Sunak was fined along with the then prime minister for attending an illegal workplace party during a Covid lockdown.

The "partygate" scandal was one of several that brought down Johnson.

Sunak's vows of integrity were in sharp contrast to that record, but he remains stalked by his predecessor's dealings in government.

A separate probe is underway into reports that just before he was made chairman of the BBC by Johnson, former banker Richard Sharp was involved in securing a private credit line for up to £800,000 ($990,000) for the then-PM from a Canadian businessman.