The British action against the Movement for Islamic Reform in Arabia (MIRA) comes three days after Washington accused its head, Saad al-Faqih, of being an al-Qaida financier.
On Friday, Chancellor of the Exchequer Gordon Brown had instructed the Bank of England to direct all British financial institutions to immediately freeze any funds held for or on behalf of MIRA, the Treasury said in a statement.
On Tuesday, the United States said it had put al-Faqih, a well-known Saudi dissident, on its list of terrorist financiers and was asking the United Nations to sanction him as well.
US authorities said al-Faqih, 47, has maintained associations with al-Qaida since the mid-90s.
Brown's order means that it is now a criminal offence for British financial institutions to hold or deal with funds held by MIRA. It is one of several similar freezes ordered by the Treasury this year as part of anti-terrorism measures.
Al-Faqih told Aljazeera.net that the action meant little as MIRA had virtually no funds to freeze.
"It is symbolic. There is no money linked to our group - there is no money to freeze. We have a name that is active only in Saudi Arabia. The group is not registered as a charity or a company," he said.
The MIRA staged demonstrations
in Riyadh and Jedda
Earlier in December MIRA tried to stage demonstrations in Saudi Arabian cities calling for the removal of the Saudi Arabian government. The protests were thwarted by the large presence of Saudi security forces.
Al-Faqih said recent moves by the US and British government were meant to silence him and give protection to Riyadh.
"They are coming to the rescue of the Saudi government. They want to paint a terrorist face on me personally and on my organisation that might deter people from supporting us," he said.
Bin Ladin link denied
Al-Faqih denied any link to Usama bin Ladin or any group that uses violence.
The MIRA website said the group seeks major reforms in Saudi Arabia.
These are "in particular, freedom of expression, freedom of assembly and the abolition of the secret police units subverting political movements and activity", it adds, saying it is committed to "peaceful legitimate means".