At present buy-to-let landlords can offset mortgage interest payments against their income. Osborne said in his Budget statement that this left those buying a home to live in at a disadvantage.

From 2017 the government will begin to limit the tax relief to the basic rate of tax – currently 20%. This will be phased in over four years, with Osborne noting many people now rely on rented properties for their income.

“Buy-to-let landlords could pose a risk to stability so we will restrict mortgage interest relief to basic rate of income tax,” Osborne said.

“All of this has contributed to the rapid growth in buy-to-let properties, which now account for over 15 per cent of new mortgages, something the Bank of England warned us last week could pose a risk to our financial stability.

“So we will act, but we will act in a proportionate and gradual way because I know many working people who save and invest in property depend on the rental income they get.”

Sponsored

How life insurance can benefit your health and wellbeing over the decades

Sponsored by Post Office

Those who rent out a room in their property will see the amount of tax relief increased to £7,500.

The Chancellor also confirmed that properties worth up to £1m would be exempt from inheritance tax.

Elsewhere, Osborne said rent relief in the social housing sector will be removed.