Chancellor Kwasi Kwarteng is reversing the plan to scrap the 45p top rate of income tax that he had announced in the so-called mini-budget. Kwasi Kwarteng issued a statement on social media announcing the decision.
Mr Kwarteng said that the plan "had become a distraction from the overriding mission to tackle the challenges facing our country". He continued: "As a result, I'm announcing we are not proceeding with the abolition of the 45p tax rate. We get it and we have listened."
The U-turn comes 10 days after the original announcement and comes after several Tory MPs voiced their opposition to the plan. There had been anger that the Government was planning to borrow money to fund tax cuts for the richest, which senior Tories like Michael Gove had said was not Conservative and Grant Shapps had said would not get through Parliament.
The Chancellor's unfunded tax cuts in the mini-budget triggered turmoil in the City, was criticised by the International Monetary Fund and resulted in a £65 billion emergency intervention by the Bank of England to restore order.
The plan to axe the 45% income tax rate for top earners and scrap the curbs on bankers' bonuses at a time when many households face a cost-of-living crisis has been condemned by political opponents and Tory critics, with Mr Kwarteng bearing the brunt of the criticism.
Prime Minister Liz Truss was accused of throwing Mr Kwarteng under a bus by singling him out as responsible for the tax cut, saying "it was a decision the Chancellor made", rather than one debated by the entire Cabinet.
Shadow Chancellor Rachel Reeves said it comes "too late" for families.
She said: "The PM has been forced to abandon her unfunded tax cut for the richest 1%. But it comes too late for the families who will pay higher mortgages and higher prices for years. The Tories have destroyed their economic credibility and damaged trust in the British economy."
After the announcement Scotland's First Minister Nicola Sturgeon tweeted: "UK gov u-turns on top tax rate abolition because it's a 'distraction'. Morally wrong and hugely costly for millions is a better description. Utter ineptitude.
"Perhaps those who slammed @scotgov for not immediately following suit should also be reflecting this morning..."
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