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. 

Zahawi reportedly settled a seven-figure demand from tax authorities with a fine for late payment when he served briefly as chancellor of the exchequer last year under Prime Minister Boris Johnson. 

Sunak appointed Zahawi as party chairman, and cabinet minister without portfolio, when he entered Downing Street in October. 

He initially deflected questions about Zahawi's activities prior to then, as concerns mounted about whether Johnson knew of the tax investigation when he appointed the Iraqi-born politician as chancellor and head of the UK's tax authority.

The inquiry was launched on Monday. Zahawi welcomed the probe and insisted he did nothing wrong in the tax case, which stems from his co-founding of the successful polling company YouGov in 2000. 

But opposition parties pointed to his shifting explanations as more details emerged in newspaper reports, and to his prior threats of libel lawsuits against journalists and a tax consultant who had been digging into the affair.