Margaret was the daughter of a barber in Stockton and worked as a housemaid. In London she lodged in the house of one Fisk in Marylebone, staying there three years and supporting herself by taking in plain needlework. Although Fisk said later that 'she was very odd at times', no one suspected her of insanity.
In July 1786, she sent a petition to the Privy Council about usurpers of the throne. It was disregarded as nonsense. On the morning of 2 August she stood in the crowd at St James's Palace waiting to see the king arrive from Windsor. As he alighted from the carriage, she presented him with a paper, and at the same time stabbed at him with an old ivory-handled dessert knife. When the king evaded the blow, she tried again. This time the old blade bent against his waistcoat. As she was disarmed, the king cried out: 'The poor creature is mad; do not hurt her, she has not hurt me.' At her lodgings, letters were found indicating that she thought she had a right to the throne. She was found to be insane and spent the rest of her days in Bedlam.
Early in 1811, the poet Shelley and his friend Thomas Jefferson Hogg of Norton-on-Tees, the Oxford undergraduates, published a thin volume of burlesque verses, entitled 'Posthumous Fragments of Margaret Nicholson, edited by her nephew, John FitzVictor.'