What does "without prejudice" mean on a letter?

It is a legal label indicating that the contents are a genuine attempt to settle a dispute and therefore cannot be shown to a court if the dispute later goes to trial.

The purpose is to allow honest negotiation. Without this protection, nobody would ever make a concession or a settlement offer, because the other side would produce it in court as an admission — "they offered £5,000, so they clearly knew they were liable." The rule exists to encourage parties to resolve disputes rather than litigate everything to judgment, and courts have long treated that as a public good.

Two conditions matter, and the label alone is not enough:

There must be an existing dispute. Writing "without prejudice" on a first letter before any dispute exists does nothing.

It must be a genuine settlement attempt. Courts look at substance over form. A letter that simply restates a position, makes threats, or contains no settlement content is not protected merely because the words appear at the top. Conversely, a letter that is a genuine settlement attempt may be protected even without the label.

"Without prejudice save as to costs" — sometimes called a Calderbank offer — is a variant. It cannot be shown to the court while deciding the case, but can be shown afterwards when the judge decides who pays costs. This creates pressure: reject a reasonable offer and beat it by less at trial, and you may pay the other side's costs from the date of the offer.

Exceptions exist. Protection can be lost where the communication is used to conceal impropriety, blackmail or fraud.

"Strictly private and confidential" is a different thing entirely and gives no such protection.

General information about England and Wales, not legal advice on a specific dispute.