Angela Rayner is facing calls to resign after admitting that she did not pay enough tax when buying her new flat.
The Deputy Prime Minister said she received incorrect legal advice that led to her paying less stamp duty than she needed to when she purchased an £800,000 home in Hove, East Sussex, in May.
She has referred herself for investigation by the Independent Adviser on Ministerial Standards and HMRC has been contacted to rectify the issue, she revealed on Wednesday.
She told Sky News: “I thought I'd done everything properly, and I relied on the advice that I received and I'm devastated because I've always upheld the rules and always have done. And always felt proud to do that.”
The admission prompted opposition calls for her to resign on Wednesday but Prime Minister Sir Keir Starmer has so far backed his deputy.
Tory party chairman Kevin Hollinrake has written to the HMRC calling on them to open a tax evasion investigation.
Ms Rayner, who is also the Housing Secretary, has faced days of scrutiny over her tax affairs after allegations she dodged £40,000 in stamp duty payments.
She explained that her son, who is disabled, received a financial award in 2020 and that money was placed in a trust. When she and her now ex-husband divorced in 2023, some of their interest in their home in her Ashton-under-Lyne constituency was transferred to that trust.
She said she sold her remaining stake in the family home, which was her “life savings”, to her son's trust in January and then used that cash to put down the deposit for the new flat near Brighton. She used £160,000 from the trust to buy the £800,000 seafront home, the Telegraph reported.
Standard stamp duty was paid based on advice from lawyers, Ms Rayner said. She is believed to have paid £30,000 on the purchase when the cost should have been £70,000.
The Tories accused her of removing her name from the deed of her family property to dodge paying an extra £40,000.
Ms Rayner added: “With all of the media reports that have been coming out, I took expert counsel advice on all of my affairs to ensure that everything was done proper.
“And that expert counsel said that the advice that I received was inaccurate because of the trust."
Asked whether she had considered resigning over the scandal, the Deputy Prime Minister she said she had "spoken to my family about it" and "the number one priority for me and my ex-husband has always been to support our children."
She added: “I feel that it is devastating for me and the fact that the reason why those confidential clauses were in place was to protect my son, who, through no fault of his own, he's vulnerable, he's got this life-changing, lifelong conditions and I don't want him or anything to do with his day-to-day life, to be subjected to that level of scrutiny because it's his and my ex-husband ... it's not fair on them.
"Often my family dragged in because of what my role is and what I do.
"But I try to uphold the high standards, and that's why I've referred myself so that the independent advice can look at everything."
During Prime Minister’s Questions, Conservative leader Kemi Badenoch said if the Prime Minister “had a backbone, he would sack” Ms Rayner.
But Sir Keir defended his deputy, telling the Commons: “She has explained her personal circumstances in detail. She has gone over and above in setting out the details, including asking a court to lift a confidentiality order in relation to her own son.
“I know from speaking at length to the Deputy Prime Minister just how difficult that decision was for her and her family.
“ She did it to ensure that all information is in the public domain. She has now referred herself to the independent adviser. That is the right thing to do, but I can be clear, I am very proud to sit alongside a Deputy Prime Minister.”
But there were growing calls for her to resign among critics.
Nigel Farage, the Reform UK leader, told The Telegraph: “I don’t see how Angela Rayner can survive this.”
Reform UK deputy leader Richard Tice told Sky News: "She was so vocal in attacking opposing politicians when she was in opposition that she can't stand up and say 'I'm the biggest hypocrite in the land'. She has to offer her resignation to the Prime Minister."
Tory shadow chancellor Sir Mel Stride tweeted: “It's utterly extraordinary that while working families and businesses are being hammered by Labour's tax hikes, Angela Rayner has failed to pay the right amount of stamp duty.
“The Deputy Prime Minister should not be setting the rules when she fails to keep them herself.”
Downing Street insisted Sir Keir had full confidence in Ms Rayner, but declined to say whether he would sack her if she was found to have breached ministerial standards.
The Prime Minister's spokesman said: "As you'd expect, we're not going to get ahead of the process.
"As she's set out in her statement today, she's referred herself to the independent adviser. She will provide him with her fullest co-operation and access to all the information he requires.
"It is now up to the independent adviser to conduct that process."
No 10 refused to say when the Prime Minister was informed about his deputy's tax underpayment or whether he had seen the legal advice she had received.
Sir Keir believes Ms Rayner should "pay what is due", his spokesman said.
Labour backbenchers appeared uncertain whether Ms Rayner would be able to survive in her current position, with several telling the PA news agency it would depend on the outcome of the investigation.
But some added that they hoped she would be able to continue, with one saying she was "doing a good job and everyone recognises she brings a perspective we need to the top team".
Another told PA: "She's not the one everyone tells me they hate on the doorstep."
