The new rules were due to come into force next month causing widespread disruption across construction.
Major contractors have been auditing freelancers employed via personal service companies as thousands of professionals are braced for a move back to PAYE.
Current rules allow workers to be employed via a personal service company (PSC) which determines whether IR35 tax rules should apply.
That responsibility was due to shift from April to contractors who will determine employment status.
Freelance workers feared losing out through higher tax payments while contractors would also face bigger bills from direct employment.
The IR35 delay is a rare ray of light in the current crisis.
Steve Barclay, the chief secretary to the Treasury, confirmed the move in Parliament on Tuesday night.
He said the move to April 6 2021 was a “deferral, not a cancellation and the government remains committed to reintroducing this policy.”
Andy Chamberlain, Director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed) said: “The government has done the sensible thing by delaying the changes to IR35 in the private sector.
“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.
“It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.
“This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.”