The British government also put a hold on the assets of Gadhafi's children, The Wall Street Journal reported.
"This is a strong message for the Libyan regime that violence against its own people is not acceptable," Treasury Chief George Osborne said in a statement.
The actions taken by the British government come the day after the U.N. Security Council imposed financial and trade sanctions on the Gadhafi government, which has used the country's military in a brutal attempt to put down a popular uprising seeking democratic reforms.
The Daily Mail in London reported the government had rescinded the diplomatic immunity of Gadhafi's family, as well.
The newspaper said scores of British oil workers were yanked out of remote desert locations in Libya by British special forces Saturday night.
Foreign Secretary William Hague said Britain was "working intensively" to determine how many Britons are still in Libya.
"We have here a country descending into civil war, with atrocious scenes of killing of protesters and a government actually making war on its own so of course it is time for Colonel Gadhafi to go," Hague told the BBC.
"And last night I signed a directive revoking his diplomatic immunity in the U.K. but also the diplomatic immunity of his sons, his family, his household.
"So it is very clear where we stand on his status as the head of state."