On 13 February 1837, Sir Rowland Hill proposed to a government enquiry both the idea of a pre-paid stamp and a pre-paid envelope, a separate sheet folded to form an enclosure for carrying letters.[3] Hill was given a two-year contract to run the new system, and together with Henry Cole he announced a competition to design the stamps. Out of some 2,600 entries, none was considered suitable, however, so a rough design endorsed by Hill was chosen instead, featuring an easily recognisable profile of Queen Victoria. Hill believed this would be difficult to forge.

Although the stamps were not officially issued for sale until 6 May 1840, some offices such as those in Bath sold the stamps unofficially before that date. There are covers postmarked 2 May, and a single example is known on cover dated 1 May 1840.[11] All London post offices received official supplies of the new stamps but other offices throughout the United Kingdom did not, continuing to accept payments for postage in cash for a period.

The Penny Black lasted less than a year. A red cancellation was difficult to see on the black design, and the red ink was easy to remove; both made it possible to re-use cancelled stamps. In February 1841, the treasury switched to the Penny Red and began using black ink for cancellations instead, which was more effective and difficult to remove. However, people still re-used stamps by combining the uncancelled parts of two stamps to form an unused whole, so in 1864 as a further safeguard the top corner stars on the Penny Red were replaced by the lower corner check letters in reverse order.