UK Home Secretary Priti Patel (AFP)
Home Secretary Priti Patel will push for the change in parliament next week, arguing that it was not possible to distinguish between Hamas' political and military wing.
The al-Qassam Brigades military wing of the Islamist movement that rules the Gaza Strip has been banned in Britain since March 2001.
But an outright ban under the Terrorism Act 2000 will bring it into line with the United States and the European Union.
Patel, who is on a trip to Washington, said the move was "based upon a wide range of intelligence, information and also links to terrorism".
"The severity of that speaks for itself," she said, calling Hamas "fundamentally and rabidly anti-Semitic", adding proscription was required to protect the Jewish community.
Israel's Prime Minister Naftali Bennett applauded the news, calling Hamas "a radical Islamic group that targets innocent Israelis and seeks Israel's destruction".
"I welcome the UK's intention to declare Hamas a terrorist organisation in its entirety -- because that's exactly what it is," he wrote on Twitter.
Foreign minister Yair Lapid added in a statement: "There is no legitimate part of a terrorist organisation, and any attempt to differentiate... is artificial."
Lapid said the move was a result of "joint efforts" between the British and Israeli governments.
If successful, flying Hamas' flag, arranging to meet its members or wearing clothing supporting the group will be outlawed.
Politically, it could force Britain's main opposition to take a position on Hamas, given strong pro-Palestinian support on the hard left of the Labour party.
Earlier this month, a man appeared in court for wearing T-shirts supporting Hamas' military wing and Palestinian Islamic Jihad, which was banned in Britain in 2005.
On three occasions in June, Feras Al Jayoosi, 34, wore the garments in the Golders Green area of north London, which has a large Jewish population.