Prince Harry and his wife Meghan will no longer be working members of Britain's royal family and they will not use their "royal highness" titles as they embark on a more independent future, Buckingham Palace said on Saturday.

"Harry, Meghan and Archie will always be much loved members of my family," Queen Elizabeth said in a statement, referring to the couple's baby son.

"I recognise the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life."

The queen added that she was "particularly proud" of how Meghan became one of the family.

Harry, 35, and his American wife, former actress Meghan, 38, sparked a crisis in the British monarchy this month by announcing they wanted to reduce their royal duties and spend more time in North America, while also becoming financially independent.

In recent days, the queen and her family have been working out with officials how this stepping back will work in practice.

The palace said Harry and Meghan will no longer receive public funds and they will repay money spent on the refurbishment of their cottage at Windsor, west of London.

The changes will come into effect in the spring of this year, the palace said.