Schools will now be able to claim extra cash for pupils who were temporarily granted free school meals (FSM) during the pandemic.
The change follows a legal challenge against the Department for Education (DfE) from Matthew Gold & Co Solicitors, brought on behalf of two unnamed clients.
Last April, the DfE extended free school meals provision to some children with "no recourse to public funds", who would not normally be eligible for the support owing to factors such as their parents' immigration status.
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However, these extra claimants did not attract pupil premium funding, which is normally paid to schools for all children who have been on free school meals at any point in the past six years.
The government has now updated its policy, meaning schools can claim pupil premium cash for children, on roll at the time of the autumn census, who were made temporarily eligible for free meals between April and October last year.
The deadline to submit claims is 5pm on 30 June 2021.
Rachel Etheridge, acting for the claimants, said: "We are fortunate to live in a country where every child can receive an education, regardless of their parents' background.
"Yet, in stark contrast, thousands of impoverished children have been prevented from claiming free school meals and the pupil premium grant simply because their parents are restricted from claiming welfare benefits due to their immigration status.
"While the latest concession from the secretary of state should see vast amounts of additional educational funding for these children, we implore the secretary of state to make good on the government's commitment that no child's education suffers because of the economic position of their parents by permanently extending the grant and FSM."