Using cash in the UK is getting harder so not really a good idea except for tiny spends in shops where cash is preferred.

It's a good idea to take a small amount of British pounds with you. You will pay more if you exchange at the airport. I don't know where you live but if you are near a city, there are foreign currency exchange booths, check the rates and ask what the fees are. No matter where you do an exchange, whether for cash or if you use a credit card over there, there will always be a fee of some kind.

If you haven't already booked your airfare, you pay more the closer it gets to your departure date. So to save money, you should book months ahead. If you are going next month, obviously a bit late for this advice. But if your plans change...

Make sure you book a return ticket. A one way into Britain and not much money would be a red flag to immigration.

I have credit cards that charge no foreign conversion fee. I had a similar debit card until recently, I need to find a new travel bank account... What everyone should watch out for is the Dynamic Currency Conversion scam, where you are asked if you want to be charged in your own currency (well, you should be asked, sometimes they try to do it without asking). You should always say no.

Our dollar ( Canadian) is close to yours in exchange value with the British pound.
I have traveled a good deal, I find London to be one of the most expensive cities I have visited.
Good luck !

I have two credit cards and one debit card that have no foreign transaction fees. I also have one cc that does charge 3% but it refunds the fees due to the type of account I have. My other two debit cards and all other cc's charge between 1% and 3%. There are LOTS of credits cards with no foreign transaction fees. Even if one's debit card does charge a small fee, it is cheaper to get £ currency in the UK than buying it and bringing from home.

If one uses a cash machine/ATM at the airport there are no extra fees. IF one 'exchanges' currency at the airport, then yes it will cost more.

If one must rely on currency exchange booths count on paying a very high premium.

Thanks for all the tips here, have I picked the most expensive city here? Should I consider a cheaper country in Europe for my budget?

There are certainly more expensive cities in Europe than London. But London is the most expensive city in the UK. London is way big for Europe (the biggest) at between 10-12 million people with a host of great things to do plus it is the Capital and they speak English there (plus about 200 other languages).

If you want cheap capital cities then Lisbon might be worthwhile. Then Eastern Europe is great so look at Estonia, Lithuania, Latvia, Romania, Bulgaria, Slovakia and the Dalmatian coast.
If you want capital cities with a lot of English spoken you have a lot of choices. If you want a capital where you are absolutely certain to be able to speak English with everyone then you can do no worse than Copenhagen, Amsterdam or Dublin. Of these Dublin is probably the cheapest.

There are also cheaper places in the UK. You could spend a week in London and then move on.

john - if you are looking at other western European places to visit which would stretch your vacation funds, have a look at the great deal on offer in Germany where you can travel throughout the country from June through August for €9 per month. There are some limitations, but with transport costs tamed you'll have more available for other things. Plus, Germany has plenty of hostels which will help keep down your accommodation costs, and plenty of decent street food!

Yes you have picked one of the most the most expensive cities. To put it into context, as an Aussie, I think you will find it more expensive than Sydney which itself is not cheap. Although the fall in sterling over the last couple of years will have helped.

Unless you want to stay in pretty grim accommodation, and as some have suggested, eat sandwiches whilst wandering around our amazing free museums I would either shorten your stay or choose another European city or substantially increase your budget.