Electrical impedance tomography (EIT) attempts to reconstruct the internal impedance distribution in a medium from electrical measurements at electrodes on the medium surface. One key difficulty with EIT measurements is due to the position uncertainty of the electrodes, especially for medical applications, in which the body surface moves during breathing and posture change. In this paper, we develop a new approach which directly reconstructs both electrode movements and internal conductivity changes for difference EIT. The reconstruction problem is formulated in terms of a regularized inverse, using an augmented Jacobian, sensitive to impedance change and electrode movement. A reconstruction prior term is computed to impose a smoothness constraint on both the spatial distribution of impedance change and electrode movement. A one-step regularized imaging algorithm is then implemented based on the augmented Jacobian and smoothness constraint. Images were reconstructed using the algorithm of this paper with data from simulated 2D and 3D conductivity changes and electrode movements, and from saline phantom measurements. Results showed good reconstruction of the actual electrode movements, as well as a dramatic reduction in image artefacts compared to images from the standard algorithm, which did not account for electrode movement.