The target date of 31 October 2018 has been set with a view to allowing sufficient time for alternative methods of payment to be put in place, and the decision will be subject to a final review in 2016.
Cheques are thought to have been in use in the UK for around 350 years, but the number of personal cheques in circulation has been in steady decline since the early 1990s.
Commenting on the decision, Paul Smee of the Payments Council said, There are many more efficient ways of making payments than by paper in the 21st century, and the time is ripe for the economy as a whole to reap the benefits of its replacement.
But the real challenge lies ahead if we are going to be comfortable to wave goodbye to the cheque, which undeniably occupies a unique place in British culture, he added.
Businesses and charities have given a mixed reaction to the news.
Age Concern and Help the Aged have expressed concern that the decision will encourage banks and retailers to begin the phase-out ahead of the deadline, placing many older people at a disadvantage.
Meanwhile, the Forum of Private Business has highlighted the need for practical and convenient alternatives to be put in place.
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