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What is legal tender?

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    ‘Legal tender’ is a term that people often use, but when it comes to what can or can’t be used to pay for things, it has little practical use.

    What is legal tender?

    Legal tender has a very narrow and technical meaning, which relates to settling debts. It means that if you are in debt to someone then you can’t be sued for non-payment if you offer full payment of your debts in legal tender.

    What is classed as legal tender varies throughout the UK. In England and Wales, legal tender is Royal Mint coins and Bank of England notes. In Scotland and Northern Ireland only Royal Mint coins are legal tender. Throughout the UK, there are some restrictions when using the lower value coins as legal tender.  For example, 1p and 2p coins only count as legal tender for any amount up to 20p.

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    What is not legal tender?

    There are many acceptable payment methods which aren’t technically legal tender.  This is why the term ‘legal tender’ has little use in ordinary everyday transactions.

    Most shops accept payment by debit or credit card, and some accept cheques and contactless payments. These are safe and convenient ways to pay, despite not being classed as legal tender.

    The same is true for Scottish and Northern Ireland banknotes. Seven banks in Scotland and Northern Ireland are authorised to issue banknotes. These notes make up the majority of banknotes in Scotland and Northern Ireland and legislation is in place to ensure that noteholders have a similar level of protection as they would for Bank of England notes. Despite this, Scottish and Northern Ireland banknotes are not classified as legal tender anywhere in the UK. Equally, Bank of England notes are not legal tender in Scotland and Northern Ireland.

    A wallpaper pattern made from Scottish banknotes.  The notes are for pounds sterling but the notes only tend to be used in Scotland and are issued by privately owned banks.

    Scottish and Northern Irish banknotes

    Does legal tender status matter for everyday transactions?

    No. Whether you pay with banknotes, coins, debit cards or anything else as payment is a decision between you and the other person involved in the transaction.

    In addition, shops are not obliged to accept legal tender. If you hand over a £50 note to pay for a banana in your local grocery store, the staff are within their rights to choose not to accept it. Likewise for all other banknotes – it’s a matter of discretion.

    When do Bank of England notes stop being legal tender?

    Bank of England notes stop being legal tender when we announce that they are withdrawn.

    Before this happens, a newly designed banknote is produced and enters circulation. Bank of England notes keep their face value for all time. If your local bank, building society or Post Office is not willing to accept them, then you can exchange them for new notes at the Bank of England.

    For the most recent note withdrawals, we publicised the withdrawal date three months in advance. For the current paper £5 note, the period is longer: it will be legal tender until 5 May 2017.

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    A withdrawn One Pound banknote

    Find out more:

    The banknotes section of the Bank of England website has information on exchanging withdrawn banknotes, Scottish and Northern Irish banknotes and other topics.

    11 comments

    1. Kingsley Udofa
      15th January 2017

      Brilliant explanation in plain and simple words.

    2. Josephine bugeja
      28th January 2017

      When will we have to stop using old £20 notes, or even the £10 an others, with our shopping?
      Thank you.

      1. KnowledgeBank_Katie
        6th February 2017

        Thanks for your question Josephine!
        There are no dates set as yet for these notes to be withdrawn. The £10 and £20 paper notes will continue to be legal tender until the date we announce following release of the new notes. We will always give at least 3 months’ notice to allow you to spend or bank them, and withdrawn Bank of England notes can always be exchanged with us, even after they are unable to be spent in shops and have stopped being legal tender.
        I hope that helps, thanks for visiting KnowledgeBank.

    3. Andrew Alp
      29th January 2017

      What is the point of bank notes if shops can refuse to accept them???

      1. Queen Liz
        3rd February 2017

        Banks accept them for a lot longer. It is important they’re out of circulation to prevent fraud. If there was too many varieties of notes still in circulation it would be harder to spot forgeries. Also the older notes would be easier to copy.

      2. colin
        25th February 2017

        The point of bank notes is to make transactions easier and convenient for both parties.

        Shops can refuse to accept *anything* : notes, coins, credit cards, gold nuggets or sheep.

        Most shops *want* to sell you stuff though.

    4. Nicholas Cogdill
      3rd February 2017

      The point of banknotes is to serve as a store of value and a medium of exchange between a person and whoever they wish to conduct business with. Even as I don’t prefer American money, but prefer British Pounds as payment, so do others have the same rights.

    5. Brian Freeborn
      17th February 2017

      Best bit of writing I’ve ever seen from Officialdom.

      Brian

    6. Mel Hough
      20th February 2017

      With so many changes taking place in notes and coinage in a short space of time it is good to know that we can pay them into a bank for any length of time. It is highly probable and a well known fact that many elderly people keep cash at home. Much of which is often not found until that very sad time arrives.

    7. Geoffrey Laws
      1st March 2017

      Thank you for your very useful information on this fascinating subject.

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