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Updated 04:00 25/05/19

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Legal tender coins


Many of our customers ask what legal tender really means, and why the value on a bullion coin is different from the actual sale price of the coin, so we thought we’d explain below.

Bullion coins, and many other proof and Brilliant Uncirculated coins, have a monetary value stamped on them, ranging anywhere from £1 up to £100. This value classes them as Sterling currency and makes them exempt from certain taxation.

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The Great Recoinage:

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In 1816 the British Government acted to re-stabilise the nation’s currency, following the Napoleonic Wars. Dubbed ‘The Great Recoinage’, the government changed from Guineas to Sovereigns and brought silver currency back into circulation.

The regulations set out specific weights and purities – many of which are still adhered to today – but specifically it detailed that gold coins were legal tender for any amount, silver up to two pounds, and bronze up to one shilling. From this point, Sovereigns were considered as £1 coins, though due to inflation this pound is far greater than a £1 today. Learn more about Sovereign coin designs and years of issue.

These regulations were in place until 1870, at which point a Coinage Act passed powers to the government from the crown. Many of these coins were removed from circulation around the time of the First World War, with fiat currency (paper money) becoming the primary currency in the UK due to trade disruption from the conflict and subsequent precious metal shortages.

The 1971 Coinage Act amended the rules once more for the Royal Mint and the UK Government. The act was timed to account for the UK’s move away from imperial measures and the introduction of decimal currency.

Section 3 of the Coinage Act features a Royal Proclamation which states that the Queen can determine (read: approve) the denomination of coins to be made by The Royal Mint, as well as decide the design, weight, dimension, fineness, and composition of coins.

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Paying off debt:

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The primary purpose of the legal tender value on British coinage is to settle debts in court. The technicality is that a debtor can’t be sued for not paying IF they pay into court with legal tender, of which precious metal bullion and proof coins from the Royal Mint count as a legitimate contribution.

There are limits to the values which can pay off a debt, which is to dissuade the public from paying fines or debts with vast quantities of low-value currency. This is negotiable though – the party due for reimbursement can be flexible with their payment expectations.

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Uncirculated Coins:

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Many people confuse the legal tender value as meaning these coins can be spent in shops or sold to banks. This is not the case. The official definition is that only circulating legal tender coins are designed to be spent or traded with businesses and banks. Uncirculated coins, such as Bullion, Brilliant Uncirculated, and Proof coins, are not eligible.

Commemorative coins, which also have a face value, are often exempt from these rules due to the nature of their production and not always being made of a precious metal. Banks have been officially instructed to refuse these coins since 2016 following several clashes between customers and the Royal Mint over the legal tender definition.

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Capital Gains Tax:

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Many of our customers will know that any Royal Mint coins we sell with a face value listed are exempt from Capital Gains Tax – a government tax on profits above a certain level, achieved by selling assets such as bullion, property, or shares.

TCGA92/S21 (1) (b) of the Taxation of Chargeable Gains Act 1992 states that Sovereigns post-1837 and Britannias are exempt due to being classed as Sterling currency and thus legal tender coins. Sovereigns pre-1837 are considered chattels – personal possessions – and have been given a specific exemption.

The TCGA 1992 states:

‘all forms of property shall be assets for the purposes of this Act, whether situated in the United Kingdom or not, including... currency, with the exception (subject to express provision to the contrary) of sterling...’.

The Royal Mint has since clarified that the Queen’s Beast series and the Lunar coins also classify as legal tender coins because they adhere to the Britannia specifications and are thus exempt.