The move, taking effect later this year, will more than double the current limit of £45.
The limit on a single payment using contactless card technology will rise to £100 later this year, the Treasury has confirmed.
The pandemic has accelerated a move away from cash, with shoppers often being encouraged to use contactless in many stores for public health reasons.
It has been less than a year since the limit was raised from £30 to £45.
Regulators say businesses could still decide themselves whether to accept the higher limit.
Fears have also been raised regarding fraud risks involved in the use of cards.
The use of contactless technology by consumers has risen sharply in recent years, with more services adopting the technology and most shops offering it as an option.
To protect workers and consumers during the Covid outbreak, an increase to the current limit of £45 was rushed through by the regulator in April last year.
The latest figures show that the proportion of contactless payments had fallen slightly compared with pre-pandemic levels, because lockdown measures hit the use of pubs, restaurants and public transport. They accounted for 41% of card transactions.
However, there was a 16% increase in the total value of contactless payments in the UK in October, compared with the same month a year earlier, according to the latest data from UK Finance, which represents banks.
The amount spent on contactless hit a monthly record in August, boosted by the Eat Out to Help Out scheme and fewer coronavirus-related restrictions. A total of £8.4bn was spent on credit and debit cards using contactless during that month.
Chancellor Rishi Sunak said: “As we begin to open the UK economy and people return to the High Street, the contactless limit increase will make it easier than ever before for people to pay for their shopping, providing a welcome boost to retail that will protect jobs and drive growth.”
However, there have been worries raised about contactless limits being raised further.
Ian Johnson, managing director, Europe, at payment business Marqeta, said: “The problem with increasing limits on physical contactless cards is if they are stolen or cloned, it will now be even easier for a fraudster to spend large sums of the victim’s money in one go.
“Physical cards provide very little security and a fraudster could continue to use their contactless function until they are cancelled.”