Social care is means-tested in England, meaning people with assets over £23,250 pay for home help or residential care.
The threshold normally rises each year, but will now be frozen for two years to help councils raise funds.
It will lead to elderly people paying for social care for longer until state help kicks in, Age UK said.
The announcement was made in a letter sent to councils in the past few weeks.
It comes on top of the wider cuts local authorities are making, including closing libraries and day centres.
These measures have been announced after autumn's spending review revealed local government funding from central government was being cut by more than a quarter over the next four years.
Under the social care system, anyone with assets worth more than £23,250 has to pay for the costs of their social care.
For residential care, that includes both savings and the value of their house and has prompted cases of people being forced to sell their family homes to pay for care home fees.
For home help, such as support washing and dressing, the value of a house is not taken into account.
The move comes after a decade in which councils have also been raising the criteria they use when assessing whether someone needs help.
More and more councils are using stricter assessments, meaning only those with the most severe are entitled to state support even before the value of their assets are looked at.
Michelle Mitchell, of Age UK, said: "This is a measure that is once again hitting the most vulnerable and is certain to cause considerable distress."
The letter sent by the Department of Health said the move was important as it would "help protect the level and quality" of services.
But a Department of Health spokeswoman played down the effect the decision would have, saying for those in care homes it would only mean paying the equivalent of an extra week in fees before state support kicked in.
But she added: "We know reform of the social care system is needed."
The government has set up an independent commission to look into social care funding amid mounting consensus the means-tested system currently in place in unsustainable.