MPs will be barred from claiming expenses for second homes and will be limited to employing no more than one family member, under new rules.
The new expenses scheme for the House of Commons drawn up by the Independent Parliamentary Standards Authority (Ipsa) will come into effect immediately after the general election and will allow MPs only to claim for rented accommodation.
MPs will not be eligible for accommodation expenses if any part of their constituency is within 20 miles of Westminster or inside a 60-minute commute by public transport. This will bar 128 MPs in the London area from claiming.
MPs will also be banned from claiming for first-class rail journeys, said Ipsa chairman Sir Ian Kennedy.
Launching the new system in Westminster, Sir Ian said the maximum MPs will be allowed to claim for accommodation and constituency office costs each year will be cut from £56,915 to £40,957 for MPs outside the London area and from £40,192 to £26,915 for those in and around the capital.
Sir Ian said: "The new system is fair, workable and transparent. It will enable MPs to carry out the job we ask them to do and will provide reassurance and value for money to the tax-paying public."
Sir Ian's scheme rows back in some respects from last year's review by Sir Christopher Kelly, who recommended a complete ban on employing relatives at taxpayers' expense.
The one-employee limit will cover not only blood relatives and spouses, but also live-in cohabitees and financial partners.
Sir Ian said: "No longer will MPs benefit from a slack allowances system. This system brings MPs' expenses into line with those in most other areas of life.
"Expenses will be reimbursed only for legitimate costs, backed up by receipts."