Cyprus's parliament has postponed its decision on whether savers must pay a levy on bank deposits under terms for an international bailout to avert bankruptcy.
The vote which was due to take place later this afternoon has been pushed back to Monday.
The delay came as Chancellor George Osborne announced that any UK Government and military personnel would be compensated - if their personal savings accounts were subject to the levy.
"For people serving in our military, for people serving our Government out in Cyprus - because we have military bases there - we are going to compensate anyone who is affected by this bank tax," he told the BBC's Andrew Marr Show.
"People who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."
Chancellor George Osborne on The Andrew Marr Show this morning Around 3,500 British military personnel are based in Cyprus. However, those among the 59,000 British residents of Cyprus who do not fall into that category could still be out of pocket.
The eurozone demand that savers pay up to 10% of deposits as a condition for the 10bn euro (£8.6bn) bailout has drawn criticism and anger in the eastern Mediterranean island.
Queues of people gathered at its cash machines on Saturday as they tried to withdraw their money ahead of the move.
And the country's cooperative banks had to shut their doors after seeing a rush of savers keen to protect their money.
Savers could apparently withdraw money but were not able to carry out electronic transfers.
The move marks the first time the 17 eurozone countries and the IMF have dipped into people's savings to finance a bailout.
An informal meeting earlier this morning for parties in the 56-member chamber to discuss the bank levy was also postponed by newly-elected Cypriot President Nicos Anastasiades.
He has said refusing the bailout would lead to the collapse of the island's two largest banks, badly burnt by their exposure to bailed out neighbour Greece.
The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn) as a condition for the bailout, mainly needed to recapitalise banks.
Nicos Anastasiades with Angela Merkel in Brussels Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.
The size of foreign deposits in Cyprus - estimated at 37% of the total - was one reason the eurozone agreed to the tax on savings, to take effect when banks reopen on Tuesday.
The tax will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.
It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.
However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro (£87.000) by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.
"Any deposits you hold above the 100,000 euro limit are not covered."
The country has a large British expatriot community, among them David Symonds who lives in Limassol.
He told Sky News: "Everybody was surprised. We were assured only a few days ago that the haircut on the deposits was a red line for the government.
"When we learned that it might become a possibility we were told it would only be on deposits above 100,000 euros. Now of course we know it affects everybody."
Cyprus was badly hit by the Greek financial crisis because of its close links to the country.
Its two largest banks saw combined losses of 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product.
The rescue package was agreed after 10 hours of talks in Brussels and was significantly less than the 17bn euros (£14.7bn) asked for.
As part of the deal, the government will also have to hike corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.
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