How the £sd system worked
The official relationship was £1 = 20 shillings, 1 shilling = 12 old pence and therefore £1 = 240 old pence. A farthing was one quarter of an old penny.
Convert the shillings by dividing by 20 and old pence by 240, then add both to the pounds. Do not divide old pence by 100.
| Old amount | Decimal pounds | Modern pence |
|---|---|---|
| 1s | £0.05 | 5p |
| 2s 6d | £0.125 | 12.5p |
| 10s 6d | £0.525 | 52.5p |
| £1 1s (one guinea) | £1.05 | 105p |
What Decimal Day changed
On Decimal Day, Britain retained the pound but replaced 240 old pence with 100 new pence. The reform changed the subdivisions and coins, not the face value of a whole pound.
This is why a pre-1971 entry written only as £5 needs no denomination adjustment, while 5s or 5d does.
Apply inflation only after the denomination is clear
Decimalisation only changed how the same amount was written. A separate calculation is needed to show how prices changed between the two dates.
For very old accounts, the National Archives also warns that different comparison methods—prices, earnings or economic status—can yield different answers.