Legal Position

Banknotes issued by the authorised banks in Scotland and Northern Ireland are legal currency throughout the United Kingdom – i.e. they are authorised and approved by the UK Parliament, a position that was established by legislation as long ago as 1845 and has been reinforced more recently by Part 6 of the Banking Act 2009.  In accordance with current legislation, Scottish and Northern Ireland banknotes are fully backed at all times by ring-fenced backing assets, which are partly held in Bank of England notes or UK coin (or a combination thereof) and partly in balances in interest-bearing accounts maintained by the issuing banks at the Bank of England. Consequently, holders of genuine banknotes issued by the authorised Scottish and Northern Ireland banks have the same level of protection as that available to holders of genuine Bank of England notes.

However, they are not legal tender, not even in Scotland and Northern Ireland.  In fact, no banknote (including Bank of England notes!) qualifies for the term 'legal tender' in Scotland or Northern Ireland

HM Treasury is responsible for defining which notes have ‘legal tender’ status within the United Kingdom and the following extract from Bank of England’s website may help to clarify what is meant by “legal tender” and how little practical meaning the phrase has in everyday transactions.

“The term legal tender does not in itself govern the acceptability of banknotes in transactions. Whether or not notes have legal tender status, their acceptability as a means of payment is essentially a matter for agreement between the parties involved. Legal tender has a very narrow technical meaning in relation to the settlement of debt. If a debtor pays in legal tender the exact amount he owes under the terms of a contract, he has good defence in law if he is subsequently sued for non-payment of the debt. In ordinary everyday transactions, the term ‘legal tender’ has very little practical application.”

It is also interesting to note that, if the strict rules governing legal tender were to be observed in a transaction, then the exact amount due would need to be tendered since no change can be demanded.

The majority of banknotes circulating in both Scotland and Northern Ireland are issued by Scottish and Northern Ireland banks, respectively.   These notes circulate and are accepted quite freely and, for the most part, they are also readily accepted in England & Wales.  You should not, however, rely on Scottish or Northern Ireland notes being accepted outside their country of issue.  This is particularly true when travelling abroad.   Our general advice would be not to carry large amounts of banknotes of any description and to make use of facilities such as travellers’ cheques, credit/debit cards and ATM cards for access to funds whilst abroad.