How do Scottish banknotes work?

We’ve all heard at least one story from a Scottish citizen visiting London or a befuddled tourist who can’t understand why the shop just refused to accept the currency a bank gave them. And why not? It’s a perfectly legitimate bank note, right?  ‘Well, It’s not legal tender in England!’ someone might say. But what does that even mean? And why does Scotland have different money in the first place? 

In this blog post, let’s delve into the Scottish banknote and set the record straight. We’ll have a look at its history and its unique status in the UK and why it gets so much grief. We’ll also understand what a shop’s legal rights are when it comes to currency printed in other parts of the UK.

Some background...

The first Scottish notes were printed in 1727 by the Royal Bank of Scotland, which was the same year the bank was founded. Prior to that, only coins were minted: the pound Scots, which was the currency in Scotland until the Treaty of Union in 1707, which created the Kingdom of Great Britain.

Unlike in England, where only the Bank of England has the right to issue notes in Pound Sterling, in Scotland, three banks hold that right: the Bank of Scotland, the Royal Bank of Scotland, and Clydesdale Bank. To make it easier to identify them, all three banks use the same colour scheme as England: £5 notes are blue, £10 notes are brown, £20 notes are purple, etc. 

Nowadays only the Royal Bank of Scotland issues £1 notes, and even though they stopped regular production in 2001, you can still get them if you go into a bank and ask for them. They are indeed a legal currency (see below) and can be accepted at shops, but they are primarily used for cultural purposes like wedding gifts or as souvenirs. It is estimated that the bank still issues about £16,000 worth of £1 notes every month. 

In addition to that, RBOS will still issue the occasional commemorative £1 note – the most recent was in 1999 to mark the inauguration of the Scottish Parliament. Two years prior, in 1997, to commemorate the 150th birthday of Scottish inventor Alexander Graham Bell, a £1 note was issued and was notable in that it was the first banknote in the EU to include a hologram in its design.

Legal tender vs. legal currency...

So what is the status of Scottish money in England? A strange quirk about Scottish notes is that they are actually not legal tender in other parts of the UK. Likewise, notes issued by the Bank of England are not legal tender in Scotland. To make it even more confusing, Scottish notes are not even legal tender in Scotland!  

To clear this up, we have to define what legal tender is. In the UK, this relates specifically to the payment of debts, and other than in this way, the term is not really used in everyday life. Essentially, if you owe someone a debt and you offer to pay them in legal tender, they are not allowed to sue you for failing to settle the debt – even if they refuse the method of payment.

In most parts of the world, legal tender includes the notes and coins that the government prints and mints, but does not include things like cheques and credit cards. In Scotland, however, they have decided that no notes shall be classed as legal tender, though coins still are (up to a point), and this also applies to Bank of England notes and coins.

Currency, generally speaking, simply refers to the system of money used to exchange goods and services. When Scotland prints notes, they are issued by retail banks as opposed to government banks, and as such are subject to the Banking Act 2009. Part of that act allows those three Scottish banks to issue notes, and it reinforces the fact that the money is legal currency of the pound sterling and can therefore be accepted anywhere in the UK.

Are shops required to accept Scottish banknotes?

The short answer is … well, no. As a business, they are technically allowed to choose whichever methods of payment they want to accept. This protects businesses from inadvertently accepting counterfeit notes, and since Scottish notes are less common, they are more likely to be counterfeited or fraudulently used in England. On the flip-side the same is true for consumers: if a shop offers you a Scottish £5 note in change, you have the right to refuse to accept it. 

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