Ms Ussher said she would also quit as an MP for family reasons
Treasury minister Kitty Ussher has quit the government after questions were raised about her tax affairs.
Ms Ussher took the step amid reports she changed the designation of her Burnley home shortly before selling it in 2007, avoiding capital gains tax.
Ms Ussher denied she did anything wrong and said she was stepping aside to prevent embarrassing the government.
The move comes on the eve of the publication of all MPs' expenses on the Parliament website.
It also follows criticism by outgoing Commons Speaker Michael Martin of Parliament's failure to get to grips with expenses reform last year.
Ms Ussher, Exchequer Secretary and MP for Burnley, resigned after speaking to Chancellor Alistair Darling and Prime Minister Gordon Brown on Wednesday.
She was immediately replaced at the Treasury by Communities Minister Sarah McCarthy-Fry.
Ms Ussher, who has two young children, said she would also stand down from Parliament at the next election, citing family reasons.
The BBC's Political Editor Nick Robinson said one of Labour's rising stars had become the latest victim of the expenses saga - demonstrating that the issue was still haunting Westminster.
Ms Ussher was one of the MPs whose second home expenses claims were investigated by the Daily Telegraph.
However, her resignation relates to separate allegations about the sale of a property in 2007 on which it is reported she did not pay capital gains tax.
Under tax laws, people with more than one property are liable for capital gains tax on the sale of their second home, but must inform Revenue and Customs which this is.
'Within the rules'
It is reported Ms Ussher re-designated her home in Burnley as her principal residence for tax purposes a month before selling it, having previously nominated her London flat in this regard.
The BBC understands the MP's accountants explicitly told her she could avoid capital gains tax if she followed a certain course of action and this letter is on her expenses file at the House of Commons.
As a result, it is alleged she and her husband saved a figure estimated to be between £9,750 and £16,800.
Our correspondent said the move would have been highly controversial for any minister but was particularly damaging as Ms Ussher worked in the Treasury.
Several Labour MPs, including former Cabinet ministers Hazel Blears, Geoff Hoon and James Purnell, have faced questions over their tax liabilities on home sales.
All insisted they acted within the rules which allow MPs to nominate the same property as their principal residence for tax purposes and their second home for expenses.
Despite voluntarily repaying more than £13,000 to the tax authorities, Hazel Blears' behaviour was condemned as "totally unacceptable" by Gordon Brown.
In her resignation letter, Ms Ussher said her actions were in line with guidance from Revenue and Customs, the Commons authorities and the firm of accountants which she had consulted.
"It is with the greatest regret I have decided to resign from the government," she said.
"After careful consideration I arrived at this decision because I do not want to cause you or the government any embarrassment."
She added: "I did not do anything wrong....Neither have I abused the allowance system of the House of Commons in any way."
Ms Ussher added that she had decided some time ago to leave Parliament at the next election since being an MP was not congenial to raising a family.
"There is no other reason for the decision," she added.
Senior Labour backbencher John McFall, chair of the Treasury Select Committee, described Ms Ussher's departure as "disappointing".
Ms Ussher was only elected to Parliament in 2005 but rose quickly through the ranks, serving as City Minister and in the Work and Pensions Department before getting her most recent role in the reshuffle earlier this month.
Her resignation is the latest in a string of departures of ministers whose expenses have been criticised including Ms Blears and former Home Secretary Jacqui Smith.
Five Labour MPs have been banned by the party from standing at the next election due to questionable claims while a number of Tory MPs have been forced to stand down at the next election because of their conduct.