Here's what the RYA says about flags.....
Flag etiquette is a combination of law, good manners and tradition. Being ill-informed of your obligations could lead you to cause insult at home or abroad by giving a signal you do not intend to give, or could lead you to a fine for breaking the law.
Only with the right flag, correctly positioned, can you to be sure that you are giving the correct message and that any signal you are giving is clear.
The most senior position for a flag on a vessel is reserved for the Ensign - this is worn as close to the stern of the vessel as possible and denotes the nationality of the vessel. A UK registered vessel should wear the national maritime flag, the Red Ensign, unless entitled to wear a special or privileged Ensign.
The burgee takes the next most senior position on the vessel which is the main masthead. Only one burgee may be flown on the vessel. A special or privileged ensign must be worn in accordance with the warrant and permit governing its use and if required by the warrant and permit should never be worn without its corresponding burgee.
The starboard spreaders are used for signalling. This is where both a national courtesy flag and the Q flag should be flown.
It is now common practice to fly the burgee at the starboard spreaders, however, no other flag may be flown above the burgee on the same halyard. You also may not fly any other flag above a national courtesy flag on the same halyard. If you fly your burgee at the starboard spreaders and are sailing in the territorial waters of another country you have a dilemma, however you choose to solve this, unless you fly your burgee at the top of the mast you will be contravening one or another element of flag etiquette.
House flags are flown from the port spreaders. A house flag may indicate membership of an association (i.e. the RYA House Flag) or society or may be to indicate membership of another club, if the burgee of a more senior club is already being flown. More than one house flag may be flown on the port halyard, but with caution that they are flown in order of seniority.
The Union flag, Welsh Dragon and the Crosses of St Andrew, St George and St Patrick are primarily land flags and should not be flown at sea by cruising yachtsmen. At sea the cross of St George is the flag of an Admiral and it should therefore not be flown by anyone else, without special dispensation. A vessel flying the St Andrew s Cross could be mistaken as saying My vessel is stopped and making no way through the water as this is the meaning of code flag M which has the same design and the St Patrick s Cross could be misinterpreted as code flag V I require assistance .
The sizes and condition of flags are important. They should not be tatty and should not hang in the water, but should still be large enough to be seen.
Here's abit more info from a yacht club webs site...
The Union Flag often called the Union Jack should never be displayed from a yacht.
It is the proper flag for any UK Citizen to fly on shore but with the exception of its
use as a Jack in the Royal Navy, it is not a sea flag.
The Pilot Jack may be flown by those who wish to “show the
flag” on a British registered yacht. It consists of the Union
Flag surrounded by a white rectangular border and is used as
follows:-
· as a stem-head jack in the bows
· an additional dressing-ship flag to be hung on a weighted line from the bowsprit
· as a signal for a pilot when hoisted at the fore
