The listed places of worship grants scheme (LPWGS) is to be extended by the Treasury for a further year until March 2021.
The scheme pays grants equal to the VAT incurred on repairs such as urgent structural work and new roofs, reducing the fundraising burden on churches and congregations.
Churches and cathedrals are responsible for fundraising for their own repairs. They contribute £220m a year to the economy and collectively run around 33,000 social action projects.
The Taylor Review which was published in 2017 concluded that church buildings play a "vital role" in providing public services and a focal point for communities across the country.
This extension of funding directly supports the aims of the Taylor Report which makes recommendations aimed at targeting resources and funding to support the care, maintenance and community use of church buildings to ensure their sustainability in the future.
The listed places of worship grant scheme will be guaranteed until 31 March 2021 under the new extended plans giving hundreds more churches the opportunity to benefit from the scheme.
Dr David Knight, Senior Church Buildings Officer, said: “We want to thank the Government for their continuing support for churches through the Taylor Pilots and the extension of this scheme. It will be a welcome reassurance to many churches with plans for the next year or two that they have certainty over VAT.”
Helen Whately, Heritage Minister, said: "Listed places of worship are a precious part of our heritage and we want to make sure they are properly protected and preserved for future generations. I'm pleased that many more of these wonderful historic buildings across the country will now benefit from the government's grant scheme."