The pound was originally the value of one pound (weight) of sterling silver (hence "pound sterling"). The sign for the pound is the pound sign, £ (or rarely just "L"). Both symbols derive from libra, the Latin word for "pound". The ISO 4217 currency code is GBP (Great Britain Pound). Occasionally the abbreviation UKP is seen, but this is incorrect.

The pound sterling is one of the world's most widely traded currencies, along with the United States dollar, the euro, and the Japanese yen.

Pound coin

One-pound coin (2000, Welsh design)

Subdivisions
One pound is divided into 100 pence, the singular of which is "penny". The symbol for the penny is "p"; hence an amount such as 50p is often pronounced "fifty pee" rather than "fifty pence".

Prior to decimalisation in 1971, each pound was divided into 240 pence — although it was usually expressed as being divided into twenty shillings, with each shilling equal to twelve pence. The symbol for the shilling was "/" or "s" — not from the first letter of the word, but rather from the Latin word solidus. The symbol for the penny was "d", from the French word denier, which in turn was from the Latin word denarius. (The solidus and denarius were Roman coins.) The multiples involved in the pre-decimal currency were such that amounts such as a pound or a shilling had many factors into which they could be exactly divided. However, as these monetary amounts decreased in spending power, and their subdivision therefore became a less important issue, it was decided instead to introduce decimal currency in order to simplify arithmetic.

After Decimal Day, the value of one penny was therefore different from its pre-decimalisation value. For the first few years after 1971, the new type of penny was commonly referred to as a "new penny". Coins for denominations of ½p, 1p, 2p, 5p, 10p and 50p all bore the name NEW PENCE (or NEW PENNY) until 1982, when the inscription changed to HALF PENNY, ONE PENNY, TWO PENCE, FIVE PENCE and so on. The old 1/ and 2/ coins were equivalent in value to 5p and 10p respectively, and as such these coins remained valid within the decimal system until the 5p and 10p coins were each later replaced with smaller versions in the early 1990s.

A £10 Bank of England note.

A £20 Bank of England note.

Legal tender and regional issues
Laws of legal tender are uniquely complex in the UK. In England and Wales, banknotes issued by the Bank of England are legal tender, meaning that they must be accepted in payment of a debt. In Scotland and Northern Ireland, no banknotes are legal tender, and each bank which issues banknotes does so in the form of its own 'promissory notes'. Scottish and Northern Irish notes are sometimes rejected by shops when used in England. Scottish and Northern Irish notes' designs are also different from the English notes' designs. The one pound coin also has many varied designs on the reverse side, which differ from year to year with new designs appearing; however, all of these are Royal Mint coins and of equivalent legality.

The nature of legal tender is even more restricted in Scotland — only Royal Mint coins are legal tender, and even then the use of smaller coins is limited (the five and ten pence coins are only legal tender to a value of five pounds, for example). However, one and two pound coins are legal tender to an indefinite amount. This was not always the case, as during World War II the Scottish banknotes were made legal tender by the Currency (Defence) Act 1939; this status was withdrawn on January 1, 1946.

To further complicate matters, some notes of the Bank of England were until recently legal tender in Scotland and Northern Ireland. This status only applied to notes under a value of five pounds, so following the withdrawal of the Bank of England one pound note in 1985, no circulating notes were covered by this clause.

All commonly circulating British coins are legal tender throughout the UK, as are the rarely seen five pound and twenty-five pence ("crown") coins. Several gold coins issued by the Mint are still legal tender, though as they have a bullion value far greater than their face value they are never used in circulation and tend to be kept by collectors.

Gibraltar and the islands of Guernsey, Jersey, Saint Helena, the Falkland Islands and the Isle of Man, which are not part of the United Kingdom, also issue their own currencies, which are fixed to the value of sterling. None of the regional currencies are legal tender in England or in other regions, but they are commonly accepted by large businesses and banks, or are sometimes accepted unknowingly- for example, many vending machines cannot distinguish between British coins and those from outside the UK. An exchange commission may be charged if used at a bank or a large business.

Such currencies tied to the Pound Sterling are known as sterling zone currencies. During the late nineteenth to mid-twentieth centuries, a large number of British dominions and colonies were members of the sterling zone.

Value against other currencies
The pound is now freely bought and sold on the foreign exchange markets around the world, and its value relative to other currencies therefore fluctuates (rising when traders buy pounds, falling when traders sell pounds). It has traditionally been among the highest-valued of all base currency units in the world.

• Historic exchange rates (since 1990) are given in Exchage rates section of the Economy of the United Kingdom entry.