The Charities Aid Foundation has said it is "delighted" at the Government's change of heart on tax relief for charitable donations.
In March Chancellor George Osborne announced a new cap on tax relief for charitable giving at £50,000.
Today the Treasury said there will continue to be no limit on what an individual can donate to charity and offset against their tax liability.
Mr Osborne said: "I can confirm that we will proceed next year with a cap on income tax reliefs for wealthy people, but we won't be capping relief for giving money to charity.
"It is clear from our conversations with charities that any kind cap could damage donations, and as I said at the Budget that's not what we want at all. So we've listened.
John Low, Chief Executive of the Charities Aid Foundation, said:
"We are delighted that the Government has responded to the challenging calls from philanthropists and charities across the country and taken the bold decision to exempt charitable donations from the cap on tax relief.
"We realise Government is responding to truly exceptional financial circumstances and is having to make tough decisions about public finances. We acknowledge and welcome the Chancellor’s decision to do the right thing and exempt charity donations from the cap. We thank Ministers for the support they have shown to charities large and small, which are so vital to the health of our country.
"The Government’s ambition to strengthen the culture of giving, encourage philanthropy and build a Big Society is something we strongly support. We are enthusiastic about working with Ministers to encourage people to give time or money to support the causes we all care about."
The foundation had warned that the Prime Minister's flagship Big Society project would be threatened by the cap on tax relief on charitable donations.
Mr Osborne said the Government would not be "distracted by unecessary arguments" after u-turns on this issue and the 'pasty tax' and 'caravan tax'
"We're going to concentrate our efforts on what really matters: keeping Britain safe in the gathering storm," he said.