* Britain's opposition party wins five seats in City govt
* The district's independence from party-politics challenged
* Labour to form official opposition in City's authority (Adds details)
By Andrew MacAskill and Anjuli Davies
LONDON, March 24 (Reuters) - Britain's Labour party won a record five seats in the City of London elections on Thursday, in a breakthrough for the party and a challenge to the centuries-old political independence of the country's financial district.
The City of London, one of the world's oldest continuously running local government bodies, is a separate entity to the Greater London Authority led by Labour mayor Sadiq Khan.
It has traditionally been represented almost entirely by independent candidates, but Labour's wins may bring into question whether the tiny district can preserve that apolitical culture.
The results will come as good news for Labour, the main opposition party led by veteran socialist Jeremy Corbyn, as nationwide polls have shown it lagging far behind the ruling Conservatives.
Labour fielded eight candidates for the authority's 100-seat lower house - standing against bankers, lawyers and accountants - and won five seats. It pledged to spend more of the area's vast wealth on residents rather than on lobbying for financial services.
"I'm very proud to have played my part in a great victory for Labour in the City," said Richard Crossan, a public relations consultant and Barbican resident, after being elected for Labour. "This is a very special day indeed."
The party is now expected to try to form an official opposition in the City's local government for the first time.
It wants to use more of the City's wealth, including about 5 billion pounds ($6.2 billion) in reserves, to spend on areas such as social housing and tackling air pollution rather than on promoting financial services.
Labour began contesting the City's elections after the onset of the global financial crisis. It failed to take any seats in 2009 or 2013, only winning its first seat in a by-election three years ago.
Many in the City want to fend off the entry of party politics, however, arguing that it will make it harder to make long-term decisions in the interests of Europe's biggest financial services hub, which is home to the Bank of England and St Paul's Cathedral.
"There is little appetite for introducing party politics into the City of London Corporation," said Brian Mooney, a former Reuters journalist, who was re-elected councillor for the ward of Queenhithe, which he has represented since 1998.
"There is scant support in the Square Mile for Jeremy Corbyn and his followers. There is no enthusiasm in a predominantly pro-business ward, such as Queenhithe, for idealistic but old fashioned cooperative socialism." (Editing by Rachel Armstrong and Vin Shahrestani)