Government regulations that would leave thousands of people with severe disabilities worse off by about £100 a month as a result of moving on to universal credit have been ruled unlawful in the high court.

The ruling followed a legal challenge to the Department for Work and Pensions (DWP) over arrangements for claimants who were receiving severe disability premium (SDP) benefits and moved on to universal credit before 16 January this year.

Two men known as TP and AR, and a woman known as SXC, who all have severe disabilities, had argued that the regulations, which restrict the amount of compensation to those affected, were discriminatory.

The challenge followed a court case last year in which TP and AR successfully argued that the DWP had unlawfully discriminated against them after their benefit income was reduced when they were required to claim universal credit because they had moved house into a different local authority area.

As a result of that case TP and AR received £6,517 and £4,788 respectively, in compensation for the “pain and distress” caused to them. They also received payments of £173.50 and £176 a month respectively to meet the continuing shortfall in their benefits.

The government subsequently proposed regulations whereby SDP claimants who lost benefit income after moving to universal credit before the establishment of income protections on 19 January would be provided with just £80 a month in compensation, while those who moved after would receive £180 a month.

TP and AR, represented by the law firm Leigh Day, and SXC, represented by Central England Law Centre, argued that the discrepancy was unjustified because the estimated 10,000 people who moved before 19 January would receive significantly less in compensation than those who moved afterwards, despite their needs being the same.

Severe disability premium and enhanced disability premium are supplementary benefit payments designed to meet the extra costs of living alone without a carer. An estimated 500,000 people in the UK receive one or both payments.

TP and AR said in a statement after the ruling: “After the high court judgment last year, we thought we had finally forced the government to ensure that people with severe disabilities who had to move on to universal credit from the old system would not be without adequate protection or worse off.

“However, we then learned that the government was proposing to short-change us and thousands of other severely disabled persons by around £100 a month. It is extremely frustrating that we have had to fight these cases through the courts when it is clear to all that the government’s unfair and dysfunctional universal credit system is indefensible.”

Tom Short, a solicitor with Leigh Day, said: “We are delighted that our clients have once again triumphed in their struggle against the government’s discriminatory universal credit policies.”

Michael Bates, who led on the case for Central England Law Centre, said: “This is a really important decision from the court. It confirms that the government’s universal credit scheme continues to treat severely disabled claimants differently, and that this treatment is unlawful. There is an obvious solution to this and we look forward to seeing the government’s response.”

A DWP spokesperson said: “We have received the court’s judgment and will be considering our response.”