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.”

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.