Measures to iron out unfairness in the way local authorities in England and Wales decide whether, and how much, to charge older and disabled people for care services are inadvertently creating new inequities, according to disability groups.

New government guidance to social services departments, taking effect from next week, is intended to make work pay for disabled people by removing a poverty trap. Earnings must be disregarded by councils and total income must be maintained at least at income support levels. But disability benefits, pensions and savings may be taken into account during assessments of personal means.

The aim is to remove barriers to work for disabled people and put an end to huge differences in charges for similar services, which have ranged from nothing in one council area to £100 a week in another.

However, local authorities will retain discretion over charging levels. The loss of payments from working disabled people, and those on income support, has prompted many councils to look to recoup the income from disabled people who are unable to work but have savings or an occupational pension.

Service-users with capital above £19,000 may be charged the full hourly rate for a service and several councils have indicated that they intend to do so - meaning that many disabled and older people are facing as much as a 500% rise in the cost of their personal care.

Alan Gladstone, 54, a former builder, receives disability benefits and a full industrial injuries pension after an accident at work eight years ago. He is awaiting the outcome of his assessment, but under the new guidance, Cornwall - his local council - may raise his home care charges from £22.30 to £75 a week. "Without home care, I could not live," he says. "But the new charges are going to destroy me. My expenses incurred from my disability are astronomical."

During his assessment, Gladstone set out these costs, including breakages and the special equipment enabling him to move around his home, in the hope that they would be set against the full charge. "Someone earning £60,000 a year would not have a penny taken into account, whereas someone not earning on income support will have their disability-related support taken into account," he says.

Gladstone, who works voluntarily as a disability welfare rights adviser, says he would love to do paid work, but cannot. "I hate being at home," he says. "I'm a man who worked for 35 years and I've never shirked a day's work in my life. I was a skilled man. I want to be out there meeting people."

While the guidance penalises those who cannot work, he argues, the government has not made the workplace any more accessible to disabled people. "If they can find an employer who'll employ me, and find me a building I could get into, then these charges may have some logic," Gladstone says. "The government is giving me an incentive to go to work. But I don't need an incentive - I need an infrastructure."

John Knight, head of external policy at disability charity Leonard Cheshire, welcomes the government U-turn on charging working disabled people for home services, but argues that the guidance is "perverse" in relation to those with savings. "Paid work is the principal driver," he says. "If you can't work, you're being crushed for it."

Home care services should be free to every disabled person, Knight says. "Why should they have to pay for what are essential services? It's like a double tax. They've paid income tax and contributions and are in the unenviable position of having to pay again."

Richard Holmes, chair of the Coalition on Charging campaign group, says the rise in charges is not confined to cash-strapped inner city authorities. "Some of the better-off authorities are seeing it as an easy way to get revenue," he says. "We're glad the government wants fairer charging and the removal of the postcode lottery, but a picture is developing where unfair charges have re-emerged in a different way."

Pauline Thompson, policy officer at Age Concern, argues that increases in charges should at least be staggered, lest older people stop their care services or attempt to make savings from other essential costs. "Local authorities need to balance their books, but all this is doing is shifting charges so that people with personal care needs are having to pay for other people with personal care needs," Thompson says. "In all other sorts of care, the costs are spread throughout the population."

· Charges for Community Care Services, a guide on the new guidance, has been produced by the Disability Alliance (tel: 020-7247 8776).