Christine Coad, of Knutsford, had been sentenced to jail in 1992 over non-payment of her poll tax to Macclesfield BC, the court was told. The term was then suspended on condition that she paid off her arrears at £4 per fortnight.
She became homeless and fell behind on her payments and her case came back before the magistrates on June 8 last year. In her absence, Macclesfield magistrates committed her to prison for 28 days and issued a warrant for her arrest.
She was duly arrested, and spent time in jail before being released on bail pending her judicial review application to the High Court.
They also agreed that they had failed to consider the option of having instalments deducted from Ms Coad's income support.
Outside court, Ms Coad's barrister, Mr Ian Wise, said she would now be joining an action group of up to 100 others who had been wrongly jailed over poll tax arrears.
In what is thought to be the largest action of its kind ever mounted, the action group is planning to seek compensation from the UK government in the European Court.