Buy-to-let landlords face cuts in the amount of tax relief they can claim on mortgage interest payments, the government has said.

The amount that landlords will be able to claim will be set at the basic rate of tax, which is currently 20%.

The move is aimed at creating a “level playing field” between homeowners and investors, Chancellor George Osborne said.

The change will be introduced over four years from April 2017.

Currently property investors can claim tax relief on their monthly interest repayments at the top level of tax they pay, meaning the wealthiest can claim as much as 45%.

Mr Osborne said the current system gave buy-to-let landlords “a huge advantage in the market”, compared with home buyers.

“The better-off the landlord, the more tax relief they get,” he said.

Buy-to-let properties now account for over 15% of new mortgages, something the Bank of England warned last week could pose a risk to the UK’s financial stability.

Separately, Mr Osborne said tax relief for people who rent out a room in their home would be increased from its current level of £4,250 – where it has been frozen for 18 years – to £7,500 from next year.

What does this mean for landlords?

It might lead to an increase in landlords owning properties and borrowing via a limited company where all interest can still be offset. The fact that the Chancellor also announced that corporation tax will be reduced to 19% from 2017 and 18% from 2020 could be a further incentive to switch the borrowing vehicle.