Coinage Act 1971: Legal Tender Limits, Melting, and Withdrawals

The Coinage Act 1971 is the main UK statute governing coins: it decides which coins are legal tender and up to what amount, makes it a criminal offence to melt circulating coins or produce unofficial ones, and hands the Crown a broad power to change coin designs, specifications, and legal tender status by Royal Proclamation. It was passed alongside decimalisation and still sets the framework for the coins in your pocket today.

Legal Tender Limits for Each Coin

Section 2 of the Act sets caps on how much you can pay in each type of coin. The limits track the coin’s metal and denomination, not just face value.1Legislation.gov.uk. Coinage Act 1971 – Section 2

Higher-value coins created by proclamation, including £20, £50, and £100 pieces, are also legal tender for any amount. In practice their collector or metal value dwarfs face value, so spending them for goods would be an expensive way to pay.

The same limits apply across England, Wales, Scotland, and Northern Ireland. Section 3(2) does let the Crown set different limits for different parts of the UK by proclamation, but no such split has been made for coins.3Legislation.gov.uk. Coinage Act 1971 – Section 3 Cross-border confusion about “legal tender” in Scotland usually concerns banknotes, not coins covered by this Act.

What Legal Tender Actually Means

The limits above matter far less than most people think, because “legal tender” is a narrow legal concept. It governs the settlement of debts. If you owe someone a fixed sum and you offer the exact amount in coins that qualify as legal tender for that sum, the creditor cannot sue you for non-payment if they refuse.4Bank of England. What Is Legal Tender?

Ordinary shopping is different. No debt exists until you and the shopkeeper agree on the sale, so either side can insist on any payment method. A shop can refuse a bag of 2p coins, decline cash entirely, or ask for card only, and none of that breaches the Coinage Act.5The Royal Mint. Legal Tender Guidelines The Section 2 caps come into play when a debt already exists and the creditor is trying to reject payment.

Melting Coins and Making Your Own

Two offences in the Act catch most consumer-facing conduct.

Section 9 makes it a summary offence to make or issue any metal piece as a coin or money token, or as something that purports to entitle its holder to demand a stated value, unless the Treasury has authorised it. The maximum penalty is a fine at level 2 on the standard scale.6Legislation.gov.uk. Coinage Act 1971 – Section 9 This is broader than counterfeiting: it covers anyone producing coin-like tokens, not only forgers copying real coins.

Section 10 makes it a criminal offence to melt down or break up any UK coin currently in circulation, or any coin that was in circulation at any time after 16 May 1969 and has since been withdrawn, without a Treasury licence. Summary conviction brings a fine. On indictment the penalty can rise to a fine, up to two years’ imprisonment, or both.7HM Treasury. Guidelines on Coinage and Banknotes Issues Even where the metal content of a coin exceeds its face value, melting it for scrap without a licence remains an offence.

How Coins Get Changed or Withdrawn

Section 3 gives the Monarch, on the advice of the Privy Council, wide power to modify the coinage by Royal Proclamation. That is why so many changes since 1971 have happened without a new statute.3Legislation.gov.uk. Coinage Act 1971 – Section 3

Proclamations decide which denominations the Mint produces, what each coin looks like, and how much it weighs. The 5p and 10p were both later downsized under this power; the current 5p weighs 3.25 grams and the 10p weighs 6.5 grams, well below the sizes set out in the original Schedule 1.

Section 3(e) also allows the Crown to demonetise coins by calling them in. That is how the round £1 coin ceased to be legal tender on 15 October 2017. Section 3(ff) lets the Crown decide, when creating a new coin, whether it is legal tender for a capped sum or without any limit at all. The £1, £2, and higher-value coins all took their any-amount status from proclamations made under this power.

Gold coins keep their historic standard: eleven-twelfths fine gold, a millesimal fineness of 916.66. The gold sovereign has a standard weight of 7.98805 grams and a “least current weight” of 7.93787 grams. A gold coin that wears below its least current weight ceases to be legal tender.1Legislation.gov.uk. Coinage Act 1971 – Section 2

Bullion Coins and the Capital Gains Tax Exemption

The Royal Mint produces bullion and commemorative coins under the proclamation powers, including gold Sovereigns, gold and silver Britannias, the Queen’s Beasts range, and high-denomination pieces up to £100. All are legal tender for any amount.2The Royal Mint. What Are the Legal Tender Amounts Acceptable for the United Kingdom Coins?

That status has a real consequence for investors. Because these coins are British legal currency, gains on their sale are exempt from Capital Gains Tax for UK residents. The exemption applies to gold, silver, and platinum bullion coins produced by the Royal Mint.8The Royal Mint. Bullion and Capital Gains Tax (CGT) A gold Sovereign has a face value of £1 but a metal value many times higher; sell it at a profit and you owe no CGT on the gain. Gold bars and foreign bullion coins do not share this exemption.

Bullion and commemorative coins do not enter general circulation. Banks and businesses are not obliged to accept them.5The Royal Mint. Legal Tender Guidelines Their legal tender status is genuine but commercially theoretical.

What to Do With Old, Withdrawn, or Damaged Coins

Once a coin has been called in by proclamation, it loses legal tender status on the specified date, and no one is obliged to accept it. Most high-street banks and larger Post Office branches will still exchange demonetised coins for customers as a matter of practice, though this is discretionary rather than a legal duty.9The Royal Mint. How Can I Dispose of Coins No Longer in Circulation? If you find a stash of old round £1 coins, your bank is the first place to try.

For damaged current coins, the Royal Mint does not take returns directly from the public. Take them to a bank or Post Office, which decides whether to accept them. Coins that still pass through a verified sorting machine can be reimbursed at face value; coins that were deliberately or recklessly damaged are not reimbursed at all.10The Royal Mint. UK Garbled Coin Policy Given the Section 10 offence, damaging coins on purpose could also expose you to prosecution, not just a refused refund.