The Department of Work and Pensions (DWP) is changing the assessment criteria for daily living costs involved in the disability benefit Personal Independence Payment (PIP).
PIP is a points-based system and the DWP is now reducing the weight of aids and appliances and the extra costs previously given to individuals on this basis.
The government said this change could affect 640,000 disabled people by 2020. Currently claimants can receive between £21.80 and £139.75 per week.
However the DWP said the change would save the Treasury £1.2bn and ensure the "system is fairer with money targeted at those who need it most."
The DWP said: "It found that aids and appliances are not a reliable indicator of extra costs in all cases. In 96% of the cases they reviewed their view was that claimants were likely to have low, minimal or nil on-going extra costs.
"Many of the aids and appliances likely to be used are also often provided free of charge by the NHS and local authorities or can be purchased for a low one-off cost.
"The Department therefore believes that change is required to ensure that PIP achieves its original policy objectives. "
The changes will reduce the weight given to the use of aids and appliances in 2 of the 10 daily living activities - dressing and managing toilet needs - from January 2017 but aids and appliances will continue to be recognised through the assessment process.
Paul Gray's independent review of PIP had found that the assessment criteria "may not be working as planned".
A subsequent review of cases by DWP health professionals identified that a significant number of people are likely to be getting the benefit despite having minimal to no ongoing daily living extra costs.
DWP data to December 2015 shows that 1 in 3 claimants receiving the daily living component of PIP do so solely as a result of needing aids or appliances. This figure has tripled in just 18 months. (Figures exclude those dealt with under special rules for a terminal illness).
The Minister for Disabled People, Justin Tomlinson, said: "The introduction of Personal Independence Payment to replace the outdated Disability Living Allowance for working age claimants has been a hugely positive reform.
"But it is clear that the assessment criteria for aids and appliances are not working as planned. Many people are eligible for a weekly award despite having minimal to no extra costs and judicial decisions have expanded the criteria for aids and appliances to include items we would expect people to have in their homes already.
"We consulted widely to find the best approach. And this new change will ensure that PIP is fairer and targets support at those who need it most."
Mark Atkinson, chief executive at disability charity Scope warned: "It is crucial that the PIP assessment accurately reflects the extra costs disabled people face.
"Buying specialist equipment, adaptations and other aids are significant and ongoing extra costs for many disabled people.
"We recognise that the government listened to the hundreds of consultation responses, but we are concerned that the changes announced today will make it harder for some disabled people to qualify for PIP.
"The government has also announced it's considering a longer-term review of disability benefits. With the Chancellor's Budget next week we will looking closely for more detail on what this means for disabled people."
A second independent review of PIP is due to be delivered by April 2017.
Further reading
Extra costs for disabled people in areas including insurance - Scope
Think tank proposes scrapping current disability benefit system
