UK Prime Minister Keir Starmer overhauled his ministerial team on Friday in a bid to reset his embattled government after deputy premier Angela Rayner resigned for underpaying a property tax.

Rayner, a figurehead among Labour's left-wing base, quit after an investigation found that she had breached the ministerial code over the purchase of a flat in southern England.

Her departure prompted Starmer to carry out the first major cabinet reshuffle of his stuttering 14-month-old premiership, during which the hard-right Reform UK party has overtaken Labour in popularity.

Starmer replaced Rayner with Foreign Secretary David Lammy, whose post as Britain's top diplomat will be taken by interior minister Yvette Cooper, the BBC reported.

Justice Secretary Shabana Mahmood will succeed Cooper at the Home Office, while Lammy will also take on the justice brief, the broadcaster added.

The shake-up comes after Rayner's resignation dealt the latest blow to Starmer's flagging government that has lurched from one storm to another since he became prime minister in July last year.

It has been forced to U-turn on welfare reforms and fuel benefits for the elderly, while its failure to stop undocumented migrants arriving on small boats has bolstered support for Reform, led by anti-immigrant firebrand Nigel Farage.

Rayner this week admitted not paying enough tax on a seaside flat she bought and referred herself to the government's independent ethics adviser.

In a letter to Starmer, ethics chief Laurie Magnus wrote that Rayner had failed to "heed the caution" of legal advice she had received so he considered the "code to have been breached".

"I accept that I did not meet the highest standards," Rayner wrote in her resignation letter, adding she would also be stepping down as housing minister and deputy leader of the Labour Party.

"I deeply regret my decision to not seek additional specialist tax advice," Rayner said, adding she took "full responsibility for this error".

In his reply, Starmer told her he was "very sad" to lose her from government, but added: "You will remain a major figure in our party".

Rayner disclosed on Wednesday that she had underpaid stamp duty, a property tax, on the apartment following days of reports suggesting that she had saved £40,000 by removing her name from the deeds of another property. (AFP)