More than 670,000 households in UK face increase in council tax from Tuesday, a survey of local authorities reveals

More than 670,000 of the poorest households in England will face an increase in council tax of £120 a year on average from Tuesday as the government withdraws a benefits safety net, a survey of local authorities has revealed.

Using freedom of information requests, a joint investigation by the Guardian and the campaigning organisation False Economy found that from April, 83 local authorities are reducing protection for vulnerable residents.

All councils in the country replied, giving the first complete picture of how this measure, which critics have called another poll tax, is affecting the poor.

Ministers cut funding for the means-tested council tax benefit by £500m last year and instructed each local authority to decide how the reduced benefit pot should be distributed.

However, to cushion the blow ministers offered £100m in "transitional grants" to councils that designed schemes that would offer some protection to the poor.

This money will not be replenished, so this year will be the first that the government will no longer take the poorest out of council tax. Of the 83 councils reducing support to the most vulnerable, more than 50 relied on the government's transitional grant funding to provide welfare relief.

An estimated 675,000 working-age households will see bills rise by an average of £127 a year, amounting to £234 on an average band D property.

Local authorities must choose between charging council tax to the working-age poor, who in many cases may not have paid council tax before, or making deep cuts to local services on top of the government's 40% cuts to council budgets.

Some councils have decided they can no longer afford to protect the poor. In King's Lynn and West Norfolk the poorest 7,000 people who have paid no council tax could face bills of more than £300.

The 4,900 most vulnerable households in North West Leicestershire in a typical property will see their council tax bill rise £100 from April to £229 a year. Before the coalition came to power they did not have a pay a penny.

In David Cameron's backyard, West Oxfordshire will cut council tax for all apart from the poorest 2,500, who previously paid nothing but must now find £120 a year.

A False Economy spokesman said: "The transitional grant was never anything more than a cynical sticking plaster to be ripped off after a year and now we see the effect of its removal – half the councils that were relying on it are hiking council tax bills for people on the lowest incomes, many of whom are already living at a deficit due to low wages, high rents and a plethora of welfare cuts."

Hilary Benn, Labour's spokesman on local government, said the government's removal of the extra funding would mean "a further rise in council tax for people on the lowest incomes, including carers, single mums and the disabled. So while the prime minister goes around claiming that council tax has been frozen, it is the very poorest people in society who will be forced to pay more".

Local authorities said ministers must give municipal government the "full amount of funding needed to provide council tax support and ensure that decisions over council tax and discounts are fully localised".

Sharon Taylor, chair of the Local Government Association's finance panel, told the Guardian: "When government handed the responsibility for administering council tax support to local authorities, it cut hundreds of millions in funding for it. The shortfall between the money councils receive to fund council tax support and the money we would need to protect those on low incomes is getting bigger and is likely to reach £1bn by 2016. At the same time, councils are tackling the biggest cuts in living memory and cannot afford to make up the difference."

The local government minister, Brandon Lewis, said: "Spending on council tax benefit doubled under the last government, costing taxpayers £4bn a year-equivalent to almost £180 a year per household. Welfare reform is vital to tackle the budget deficit left by the last administration.

"Our reforms to localise council tax support now give councils stronger incentives to support local firms, cut fraud, promote local enterprise and get people into work. We are ending the last administration's 'something for nothing' culture and making work pay."