Nadhim Zahawi has been sacked as Tory party chairman after paying a penalty to resolve a multimillion-pound tax dispute while he was chancellor.

In a letter to Mr Zahawi published on Sunday morning, Prime Minister Rishi Sunak said it is “clear that there has been a serious breach of the Ministerial Code”.

Mr Zahawi had faced pressure in recent days to quit as questions swirled about his finances even after he released a statement to “clear up some of the confusion”.

He admitted he paid what HM Revenue & Customs said “was due” after it “disagreed about the exact allocation” of shares in the YouGov polling company he co-founded, an error he said was “careless” not deliberate.

But he has not disclosed the size of the settlement – reported to be an estimated £4.8m including a 30% penalty – or whether he paid a fine.

Zahawi fired as Tory party chairman – politics latest

Mr Sunak had resisted earlier calls from opposition parties to sack Mr Zahawi and instead asked his new ethics adviser – Sir Laurie Magnus – to assess whether the HMRC settlement amounted to a breach of the ministerial code.

But in a letter written by Sir Laurie to the PM this morning, the ethics adviser concluded that Mr Zahawi had “shown insufficient regard for the general principles of the Ministerial Code” and not fulfilled the requirements of being an “honest, open and an exemplary leader”.

In the correspondence to Mr Sunak released by Downing Street, Sir Laurie said his overall judgement was that “omissions” by Mr Zahawi regarding his tax affairs “constitute a serious failure to meet the standards set out in the ministerial code”.

In his report, dated 29 January, Sir Laurie wrote: “Given the nature of the investigation by HMRC, which started prior to his appointment as secretary of state for education on 15 September 2021, I consider that by failing to declare HMRC’s ongoing investigation before July 2022 – despite the ministerial declaration of interests form including specific prompts on tax affairs and HMRC investigations and disputes – Mr Zahawi failed to meet the requirement to declare any interests which might be thought to give rise to a conflict.”

Sir Laurie also told the PM: “I also conclude that, in the appointments process for the governments formed in September 2022 and October 2022, Mr Zahawi failed to disclose relevant information – in this case the nature of the investigation and its outcome in a penalty – at the time of his appointment, including to cabinet office officials who support that process.

“Without knowledge of that information, the cabinet office was not in a position to inform the appointing prime minister.”

In a second letter written by the prime minister to Mr Zahawi, Mr Sunak informs the Tory party chairman of his subsequent decision to remove him from his ministerial post following Sir Laurie’s findings.

“When I became prime minister last year, I pledged that the government I lead would have integrity, professionalism and accountability at every level.

“That is why, following new information which came to light in recent days regarding your personal financial arrangements and declarations, I asked Sir Laurie Magnus, the Independent Adviser on Ministers’ Interests, to fully investigate this matter.

“You agreed and undertook to cooperate fully with the inquiry.

“Following the completion of the independent adviser’s investigation – the findings of which he has shared with us both – it is clear that there has been a serious breach of the Ministerial Code.

“As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government.”

The PM added that Mr Zahawi should be “extremely proud” of his “wide-ranging achievements in government over the last five years”, particularly crediting his “successful oversight of the COVID-19 vaccine procurement and deployment programme”.

Labour, the Lib Dems and a former Tory minister had publicly called for him to go.

Caroline Nokes earlier this week said there were “too many unanswered questions” over the former chancellor’s actions and that he was “leading too many front pages”.

Speaking to the BBC’s Sunday with Laura Kuenssberg programme about Mr Zahawi’s departure, Levelling Up Secretary Michael Gove said “because someone commits a lapse or a sin, that shouldn’t be automatically taken as an opportunity to damn an entire organisation or a way of working”.

There were signs the prime minister’s position on the matter was shifting on Friday when he failed to place full confidence in the Tory party chairman as the investigation continued.

Speaking from his grace and favour Buckinghamshire home Chequers during an awayday with his cabinet, Mr Sunak said he believes “in due process” when asked if he has confidence in Mr Zahawi.

The PM added: “When I appointed Nadhim Zahawi to his current job, no issues were raised with me.

“But because Nadhim Zahawi himself put a statement into the public domain and there was other reporting, there are questions to answer.”