Town halls will be able to hike council tax by up to 2% without holding a referendum after the Liberal Democrats blocked Tory calls for a tougher limit.
Deputy Prime Minister Nick Clegg is understood to have vetoed a 1.5% cap for this year over fears that it could hit "vital" services.
The threshold is due to be confirmed by Communities Secretary Eric Pickles in a written statement to MPs today.
The coalition has tried to keep council tax down in two main ways - by offering financial top-ups to authorities who pledge freezes, and by insisting local referendums are held on increases above 2%.
Mr Pickles is believed to have been pushing for a lower limit this year ahead of a general election where living standards are set to be a major battleground.
But a source close to Mr Clegg confirmed he had stepped in to block the move.
"Local councils have frankly worked miracles in recent years in very difficult times, delivering essential services to the public when facing massive cuts," the source said.
"All we're asking is to give them some future certainty and keeping it at the current level of 2%.
"They have been cut to the bone and to throw more uncertainty their way would threaten vital things on which everyone relies."
The average bill for a band D property was £1,444 last year, meaning a 2% increase would cost householders around £7.20 more than a 1.5% rise.
The row is the latest sign of growing tensions between the two parties, as they seek to differentiate themselves in the final lap of the electoral cycle.