The current circular £1 coin has become an easy target for forgers and will be replaced by a 12-sided version, chancellor George Osborne will say in the Budget today.
Introduced from 2017, the new pound coin will be the same shape as the 'threepenny bit' which went out of use in 1971. The Treasury says it will save taxpayers money by cutting down on fraud -the Royal Mint estimates there are about 45 million fake £1 coins in circulation.
'The current £1 coin design is now more than thirty years old and it has become increasingly vulnerable to counterfeiting over time,' said Adam Lawrence, Chief Executive of The Royal Mint.
The new £1 coin will still have the queen's head on one side, and there will be a public competition to design the 'tails' side of the coin.
The 12-sided version will be constructed from two different coloured metals and contain an iSIS security feature - a new high security coinage currency system developed by The Royal Mint.
However, the new coin is estimated to cost £20m to introduce, Andrew Mills, director of circulation for the Royal Mint, told BBC Radio 4 this morning.
This is mainly due to the fact that the new coins will need to be accepted in supermarket trolleys, parking meters and vending machines, he said. 'We want to make the transition as smooth as possible'.
Last year the Bank of England announced the UK will switch to plastic pound notes from 2016, ending 320 years of paper money.
The new 'polymer' notes will start with a new £5 note featuring Winston Churchill in 2016 and the Jane Austen £10 a year later.