14 Jul 2024

Why arguing about legal tender is a waste of time

Every so often, a debate crops up on social media about legal tender. Well, more of an argument really. Tensions sometimes run high on whether or not Scottish bank notes should be accepted by shops elsewhere in the UK.

The currency position is nice and straight forward in England and Wales. Bank of England notes and Royal Mint coins are universally accepted. But in Scotland and Northern Ireland, certain banks issue their own notes. You can also find unique bank notes on islands like Jersey, Guernsey and the Isle of Man.

The debates usually revolve around whether or not these bank notes are legal tender and if shops are obliged to accept them.

Confusingly, all of these notes represent the Pound Sterling, but they have different characteristics when it comes to legal definitions.

I remember studying this topic many years ago, as part of my banking exams. I actually found it mildly interesting, so let’s clear up the misunderstanding around this tricky topic.


Not all cash in the UK is legal tender

Royal Mint coins


Let’s start with the straight forward bit. Bank of England notes and Royal Mint coins are legal tender in England and Wales. This is also true in the Crown Dependencies of the Channel Islands and the Isle of Man.

Slightly less straight forward is the fact that Crown Dependencies are not part of the UK. Their island governments issue their own bank notes and coins, which are also legal tender in their respective islands. They are not, however, legal tender in the rest of the UK.

Next, let’s consider Scotland and Northern Ireland. They are, of course, part of the UK but they each have clearing banks that are licensed to issue their own bank notes. Many people think these notes are legal tender, but they’re not. They’re not in Scotland or Northern Ireland, never mind elsewhere in the UK.

So what about Bank of England notes in Scotland and Northern Ireland? Well, they’re not legal tender either. This means we have a weird situation in which no bank notes are legal tender in these two parts of the United Kingdom. Only Royal Mint coins are.


Is ‘legal currency’ any different?

We don’t hear so much about ‘legal currency’, but in reality, this is probably more important.

Scottish and Northern Ireland bank notes are legal currency. This means they are authorised and approved by the UK parliament. So they can be accepted anywhere throughout the UK.

Genuine Scottish and Northern Ireland bank notes have the same level of protection as Bank of England notes.

The legislation behind this extends as far back as 1845 and you can read more from The Association of Commercial Banknote Issuers here.


What power lies in the term ‘legal tender’?

Just because legal currency “can” be accepted as payment for goods and services, it doesn’t mean that it “must” be accepted.

And, contrary to the opinion of many, this is also true of legal tender. Retailers are perfectly entitled to decline a sale for any reason and they cannot be made to accept any form of currency.

So for disgruntled travellers who may have come across problems spending Scottish notes ‘down south’, no-one is in the wrong. You could argue that it doesn’t make great business sense to refuse legal currency, but that’s up to the retailer.

This begs the question “So, what’s the point of legal tender?”

In law, it has a very narrow technical definition. According to the Bank of England, it means that if you offer to fully pay off a debt to someone in legal tender, they can’t sue you for failing to repay.

So for every-day life, the term ‘legal tender’ is pretty meaningless.



In conclusion then, you’re wasting your time if you get into debates about this. It doesn’t really matter if your £10 note meets the technical definition above. If shops don’t want to accept your money, that’s up to them.

At the end of the day, all notes and coins issued by authorised banks in the UK are exchangeable and backed up by the Bank of England.

Paper money is being used less and less anyway. We’re fast becoming a cashless society and when that happens, the concept of legal tender will be even less relevant.