A draft order due to laid before parliament will allow Wagner's assets to be categorized as terrorist property and seized, the interior ministry said in a statement.
Interior minister Suella Braverman described Wagner as "violent and destructive." It had acted as "a military tool of Vladimir Putin's Russia overseas," she said.
Kremlin spokesman Dmitry Peskov said Wagner did not exist from a legal point of view.
"There's nothing to comment on," he said when asked about the measure.
Across Ukraine, the Middle East and Africa, Wagner has been involved in looting, torture and "barbarous murders," the British statement said, calling it a threat to global security.
"They are terrorists, plain and simple - and this proscription order makes that clear in UK law," Braverman said.
The order is expected to come into force on Sept. 13, after which it would be a criminal offense to belong to or promote the group, arrange or address its meetings and carry its logo in public, punishable by up to 14 years in jail.
David Lammy, the opposition Labour Party's foreign affairs spokesman, said the move was "long overdue." The government should now press for Putin to be prosecuted for his aggression, he said.
Wagner has operated in Syria and a number of countries in northern and western Africa.It recruited thousands of convicts from Russian prisons to fight in Ukraine, providing the main assault force for Russia's 2022-2023 winter offensive there.
In June, it mounted a brief mutiny in Russia, condemned as treason by Putin, and on Aug. 23 its boss Yevgeny Prigozhin and top lieutenants were killed in a plane crash.
Britain sanctioned Prigozhin in 2020, Wagner as a whole in March 2022, and in July this year sanctioned individuals and businesses with links to the group in the Central African Republic, Mali and Sudan.
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