Three pound coins in every 100 were found to be fake, according to official figures.
A Royal Mint sampling of coins has discovered that just over 3 per cent - about 44 million £1 coins - are counterfeits. The number of fake £1 coins has more than doubled in the past decade.
Any person using one is breaking the law, meaning that millions are unwittingly committing a crime.
Key signs that betray a fake include a poorly defined ribbed edge and a date and design on the reverse that do not match, experts say.
Lord Sassoon, the Commercial Secretary to the Treasury, disclosed that the number of counterfeit banknotes, mostly £20 notes, taken out of circulation last year was about 374,000.
How to spot counterfeit banknotes
23 Sep 2009
The Royal Mint carries out surveys every six months to track levels of counterfeiting.