Iceland’s prime minister has resigned – the first major casualty of the leaked Panama Papers that have shone a spotlight on offshore finance.

The leaks, from Panama-based law firm Mossack Fonseca, showed Sigmundur Gunnlaugsson owned an offshore company with his wife but had not declared it when he entered parliament

He is accused of concealing millions of dollars’ worth of family assets.

Mr Gunnlaugsson says he sold his shares to his wife and denies any wrongdoing.

He is one of dozens of high-profile global figures mentioned in the 11.5 million leaked financial and legal records, which were first published on Sunday.

Pressure on Mr Gunnlaugsson to quit had been building since then, with thousands of people protesting outside the parliament building in the capital Reykjavik on Monday and opposition parties tabling a confidence motion.

Earlier on Tuesday, the prime minister asked President Olafur Ragnar Grimsson to dissolve parliament and call an early election.

But Mr Grimsson said he first wanted to consult leaders of the Independence Party, which has been in the ruling coalition with Mr Gunnlaugsson’s Progressive Party since 2013.

Gudlaugur Thor Thordarson, the chairman of the Independence Party, said the prime minister’s request had come as a “total surprise” and was not “the rational thing to do”.

Later, ahead of the confidence vote, Mr Gunnlaugsson announced he was stepping down.

The Progressive Party’s deputy leader, Agriculture Minister Sigurdur Ingi Johannsson, told reporters after a meeting that the party planned to name him as the new leader.

The documents leaked from Mossack Fonseca show that Mr Gunnlaugsson and his wife bought Wintris in 2007.

He did not declare an interest in the company when entering parliament in 2009. He sold his 50% of Wintris to his wife, Anna Sigurlaug Palsdottir, for $1 (70p), eight months later.

Mr Gunnlaugsson says no rules were broken and his wife did not benefit financially.

The offshore company was used to invest millions of dollars of inherited money, according to a document signed by Mrs Palsdottir in 2015.

Court records show that Wintris had significant investments in the bonds of three major Icelandic banks that collapsed during the financial crisis which began in 2008.

Some of Icelanders’ anger is believed to stem from the perceived conflict of interest.

The prime minister was involved in negotiations about the banks’ future and had characterised foreign creditors who wanted their money back as “vultures”, while Wintris itself was a creditor.

Mr Gunnlaugsson had kept his wife’s interest in the outcome a secret.

A spokesman for the prime minister said on Monday that Ms Palsdottir had always declared the assets to the tax authorities and that, under parliamentary rules, Mr Gunnlaugsson did not have to declare an interest in Wintris. (BBC)

•Photo shows Iceland’s former prime minister Sigmundur Gunnlaugsson.

Update news