After 3 months it's a bit too late for that.
You will hurt her, but at least you were decent enough not to sleep with her. Once she gets over the upset, at least she can hold her head up high and say "well, at least I never slept with him". It will be a bit of cold comfort.
Whatever you do, DO NOT tell her that you didn't want to sleep with her because you knew you didn't fancy her. That will just humiliate her and make her feel even more like crap.
Don't waste your time telling her 'it's me not you' or anything like that; she will think it's her. You can say you're very busy and under stress, or just simply, that's she's a wonderful person but you don't think things are working out.
I would recommend avoiding her for a few months afterwards, to avoid confusing the hell out of her, and then try again and see if you can be friends (if that's what you want). Hopefully by then she may also have another boyfriend.