Legal tender is actually a specific, technical term with a very narrow legal definition. It means that currency described as ‘legal tender’ can be used to settle or clear a debt in court. If someone is being sued in court over an unpaid debt, they can pay that debt using any ‘legal tender’.

It doesn’t mean that any coin described as ‘legal tender’, such as a commemorative coin that was purchased at face value (eg a £5 coin that was sold for £5) can be used in everyday transactions, such as buying a newspaper, the weekly groceries or filling your car with fuel.

There are also strict rules governing the amounts that can legally be paid using different coin denominations; for example, if you try and pay entirely in 1p coins then the legal maximum allowed for that transaction is 20p. If you were to try and pay for 21p of goods with just 1p coins, the retailer would be entirely within their rights to refuse. The same goes for 5p coins (maximum £5), 20p coins (maximum £10), etc.

Of course in the case of collectable commemorative coins, it’s highly unlikely that anyone would want to use them to pay for day-to-day items, even if they are ‘legal tender’. The fact that they are issued in small mintages, as limited editions, often finished to Proof quality and struck in precious metals, means that they are likely to have cost much more than their actual ‘face value’ or denomination (50p, £1 etc) in the first place. They might be ‘legal tender’, but their value is far greater than that.