There was mounting pressure for Nadhim Zahawi to be removed amid allegations that he had to settle for several million dollars in unpaid taxes when he was in charge of the country's treasury.
In a letter to Zahaei, Rishi Sunak wrote that he had been forced to take action after promising at the start of his tenure that his government would "have integrity, professionalism and be accountable at all levels."
"Having completed the independent assessor's investigation, it is clear that there has been a serious violation of the ministerial code," he explained.
Although Zahawi had admitted a dispute with the taxman, he claimed that his mistake was "careless and was not deliberate''. The settlement with the tax authorities was nearly 5 million pounds ($6.2 million), according to British media.
Last July 5, Zahawi was appointed as the new head of the Treasury and worked until September 2022. The prime minister said he had made his decision following an investigation into the party leader's finances by the government's independent standards adviser.
The report by the UK prime minister's independent advisor on Ministers' Interests, Laurie Magnus, concluded that Zahawi had shown "insufficient regard'' for ministerial standards and the demands of "being honest, open and an exemplary leader with his own behavior'' in public life.
The investigation by the British Treasury focused on the sale of YouGov shares worth some 27 million pounds ($33.4 million).
The inquiries began in April 2021, but Zahawi failed to declare them when he was appointed head of the Treasury more than a year later.
Zahawi reported in a statement that it had been a privilege to serve in different governments and assured the prime minister of his continued support.