I recently read that even though Scotland and England use the pound, Scotland has its own note, which, though legal tender throughout Britain, are not always accepted in England. Is it the same with coins? We will be spending most of our time in Scotland and will just be passing through a short distance in England, to New Castle. We will be taking the ferry to Amsterdam. Will Scotish pounds be accepted on the ferry and in New Castle for a quick bite to eat or is it going to require a trip to an ATM to get a small amount of British pounds?
Scotland has its own banknotes (three different banks issue them!), but the coins are the same throughout Great Britain. That said, Northern Irish coins are accepted in England, Scotland and Wales. Scottish banknotes are not actually legal tender outside Scotland, but that's a complicated story and it doesn't mean they aren't accepted in England/Wales.
Some places in England can be funny about Scottish notes, but I think you should be OK in Newcastle. Just avoid Clydesdale Bank notes, and worse comes to worse, you can always get ENGLISH pounds (Scotland is part of Britain!) at an ATM or exchange the notes at any bank.
Scotland has their own bank notes (paper money), but not their own coins. So the coins are the same throughout the UK. In Scotland, both the Scottish and the English notes are used interchangeably. Just use the Scottish notes first and you should be fine. For safety's sake, maybe put a few English bank notes aside, for use in England.
You are correct that the Scottish notes are legal tender in England (edited: Hmm, I was led to believe that they are legal in England, but Kate would know better, living there.), but that some merchants (and even banks) may not accept them. It gets even worse outside of the UK.
Scottish notes are NOT legal tender in England & Wales or in Northern Ireland, but they are legal currency. There's a good explanation of the whole issue on Wikipedia: http://en.wikipedia.org/wiki/British_banknotes
The only hang-up is that some businesses in England - generally further from the border - won't take them. I find this really annoying since we use English banknotes and any bank will exchange the notes if you can't give them to people as change.
The coins represent different countries within the United Kingdom, but all are issued in all of the countries. My change in Scotland has tends to be equally divided between the different designs (the quote on the side changes too, I think).
You are right - pound notes are only issue in Scotland, and only by the Bank of Scotland. They're not that common, probably because many people save a couple if they get them as change.
Take a good look at your pound coins. They are like our quarters. Different backs from different parts of the UK, it kind of fun. It is also my understanding that only Scotland has pound notes, again just kinda fun.
A related question - are Scottish bank notes typically accepted in N. Ireland? A friend gave me a few Scottish pound notes to use on my Ireland tour. Aside from the coins, will I have trouble using the paper notes?