Viewers who watch the BBC's iPlayer service will now have to pay the licence fee, closing a loophole which allows them to use it for free.
In a white paper published today, Culture Secretary John Whittingdale announced that on demand viewers will have to pay the charge, which will now be raised in line with inflation.
There had been growing concern that around 500,000 "free riders" are catching up on hit shows like the Great British Bake Off and the Night Manager while avoiding the payment.
Plans for the iPlayer charge were set in motion in July 2015 when the corporation reached an agreement with the Government which saw it agree to pay for the cost of providing over-75s with free television licences.
In return, the Government pledged to review the licence fee and how it functioned alongside the iPlayer.
Further changes to the corporation in the White Paper include a new board of governance, with the director general still in charge of editorial decision.
The BBC will also be forced to publish the salaries of staff earning more than £450,000 in a bid to increase public accountability.
Mr Whittingdale confirmed that media watchdog Ofcom will regulate the broadcaster, the first time it has had an external regulator.
The Cuilture Secretary told MPs: "The BBC is and must always remain at the very heart of British life. We want the BBC to thrive, to make fantastic programmes for audiences and to act as an engine for growth and creativity.
"Our reforms give the BBC much greater independence from Government in editorial matters, in its governance, in setting budgets and through a longer charter period.
"They secure the funding of the BBC and will help it develop new funding models for the future."
He said the licence fee remains "the most appropriate funding model" for the BBC, and will increase in line with inflation until 2021/22, when there will be a new settlement.
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