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Universal Credit policy previously insisted that claimants would have to pay the costs of childcare in the first instance, and then claim the costs back later.
Parents on Universal Credit can claim 85 per cent of the cost of childcare, up to a cap of £646 per month, for each child under 16.
However, parents must pay up front before claiming the costs back later - often leaving parents facing huge bills.
The case was brought about by Nichola Salvato, a 49-year-old benefits advisor from Brighton who found herself struggling after switching jobs in September 2019.
Nichola had to cut her hours to look after her daughter, 12, and was forced to borrow £2000 from payday lenders and family members to cover childcare costs.
Mr Justice Chamberlain backed Nichola's claim that the rules were "irrational" and went against the European Convention on Human Rights.
The judge said the rules had effectively made Nichola financially worse off, resulting in "a cycle of debt" and "psychological effects."
He explained that because the vast majority of those claiming childcare costs on Universal Credit are female - 80 per cent in total - the rules had a "disproportionate effect on women".
However, this is not the end of the battle - as the Department for Work and Pensions has since said they are now looking to overturn this ruling in the Court of Appeal.
A DWP spokesperson said: "This is currently a matter for the Court and the Secretary of State is appealing this decision".
Figures from August last year show that 52,000 households claimed childcare costs under Universal Credit, with 42,000 of those made up from single-parent families.
However, charity Save the Children fears these figures are now out of date, and believes the ruling could help "half a million parents up and down the country to stay in work and stay out of poverty."
Spokesperson for the charity Becca Lyon told The Mirror: "For years we have been hearing from parents that the system is unfair is forcing them to run up debts, face financial hardship, or even drop out of work altogether because they can't afford to pay childcare or nursery fees in advance.
Today's judgement will help half a million parents up and down the country to stay in work and stay out of poverty.
"As we come out of the pandemic and the economy begins to recover, access to childcare is especially important to get the economy moving again.
"We look forward to working with Nichola and the DWP to make sure this change is implemented quickly and in the best way possible for families."
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