Merton Council will not introduce cuts to benefits for low income households despite a loss of government funding.
As a result, 14,000 families currently receiving financial support for their council tax will be spared cuts to their benefit.
From April 2013/14, the government will hand over control of council tax support schemes to local authorities which will mean a 10 per cent cut to the amount of funding local authorities receive to support low income families.
Funding will be cut by a further 10 per cent from April 2014 resulting in a total loss of £1.6m for Merton Council.
Instead of passing the cost onto hard up families, Merton Council has said it will absorb the cost and review the scheme 2014/15.
Councillor Mark Allison, cabinet member for finance, said: "We are committed to helping those residents who already receive Council Tax Benefit for the next financial year, unless their circumstances change.
"At a time when many people are facing financial difficulties, we did not think it was right to cut financial support and put up tax for lower income households.
"Making them pay more tax would have a significant and detrimental impact on their families.
"We want to keep Council Tax low for everyone, and have frozen Council Tax for two years, and this new scheme will mean no council tax rise for the 14,000 Merton households who sadly need financial assistance."
For more information, please visit merton.gov.uk/advice-benefits/benefits/hb-ctb/hbctbreform