Prime Minister Liz Truss is to ditch plans to abolish the 45p rate of tax for higher earners, Sky News understands.
In a huge reversal on the controversial policy announced in the mini-budget earlier this month, the government is set to make the announcement soon.
The 45p income tax cut policy was one of a series that prompted turmoil in the markets over the past week, with the pound reaching record lows against the dollar.
Several Tory MPs have voiced their disapproval of the plan – which would benefit the wealthiest 1%.
The policy would have to go to a vote of MPs before it could be approved.
On Sunday, the Conservative party said any Tory MP who voted against the mini-budget would have the whip removed (suspended from the Tory party).
However, many senior MPs spoke out against the plan – including former cabinet ministers Michael Gove and Grant Shapps.