The pound has jumped against the dollar after the Government announced it would U-turn on plans to cut the 45p top rate of income tax.
The pound hit a record low just last week , sparking fears of interest rate rises and spiralling inflation.
The pound began to fall after Chancellor Kwasi Kwarteng unveiled his mini-Budget on September 23.
This promised £45billion of tax cuts, funded by national debt.
One of Kwarteng's plans was to scrap the 45p rate of Income Tax, which is paid by 660,000 of the richest people in Britain.
But his announcements caused the value of the pound to fall.
Yesterday the Government U-turned on plans to abolish the 45p tax rate - and the pound has begun to rise again.
One pound is now worth $1.14 - up from lows of $1.07 on September 27.
Kwarteng admitted “we saw people’s reactions” and the 45p tax cut “was drowning out a strong package of intervention".
The Chancellor tweeted: "It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing the country. 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 pound fell because currency investors got spooked by the idea the UK would be cutting taxes and taking on debt, all while inflation is running high.
To many, this looked like a rash decision by the Chancellor.
So investors began selling their shares of the pound as they felt the price of it would drop - but a mass sell-off meant it dropped even further.
When the pound isn't worth very much it's bad news for your money - and the wider economy.
A falling pound can push up the price of goods and services, which in turn could increase inflation rates.
This is because the if the value of the pound drops, it makes it more expensive for retailers and manufacturers to import food, goods and materials.
Energy bills are one of the things that are likely to increase as the pound falls, as the price of all of the gas that the UK uses is based on the dollar.
But Kwarteng also wants to cut the basic rate of income tax too, by 1p - and these plans are unchanged.
You start to pay tax on your earnings above a certain threshold.
At the moment this is 20p in the pound, but this will drop to 19p from April 2023.
Currently, if you earn up to £12,750 you pay no income tax.
Everything you earn between £12,571 and £50,270 is taxed at 20% - that's called the 'basic rate'.
Earnings between £50,271 and £150,000 are taxed at 40%, the 'higher rate'.
The top tax rate is called the 'additional rate', and is 45% of everything you earn over £150,000 a year.
