London and parts of England will be placed under stricter lockdown measures from Sunday and travel from those areas abroad will be banned.
Prime Minister Boris Johnson announced the new restrictions on Saturday due to the rapid spread of a new strain of Covid-19 in England which he said is up to 70 per cent more transmittable than the previous strain.
"It seems the spread is now being driven by the new variant," Mr Johnson said.
"There is no evidence that it causes more severe illness or higher mortality but it does appear to pass on more easily."
Mr Johnson held urgent talks with his Cabinet on Saturday to assess the threat.
He later addressed the nation with the government's chief medical and scientific advisers and announced new tougher measures.
England had been due to relax Covid restrictions for five days over the Christmas period from next Wednesday, allowing three separate households to meet indoors.
But now Mr Johnson says those in the new tier four, which includes London, the east of England and the south-east, cannot mix outside their households at Christmas.
In other areas people will now only be allowed to see three other households on Christmas Day only.
"As your prime minister there is no alternative open to me," he said.
"It is with a heavy heart we cannot continue with Christmas as planned.
"We are taking these extra steps to protect the country."
Mr Johnson said those in the new tier four areas "must stay at home" apart from essential travel and non-essential shops must close.
People in tier four, such as London, will be banned from travelling abroad except for work, must not leave their areas and can only meet one other person not in their household outdoors.
Places of worship in the toughest restriction areas will still be allowed to open.
The new measures will come into place at midnight on Saturday and will be reviewed on December 30.
Just hours after Mr Johnson's announcement a mass exodus began of people desperate to leave the Capital before the midnight curfew came into effect.
One train company told The National that within two hours of his speech many trains to the north of the country leaving Kings Cross on Saturday night had been reserved.
Prior to the announcement 38 million people in England had been placed in the government's toughest tier three facing the strictest restrictions.
The government on Monday had said a rise in infections might be partly linked to a new more transmissible variant of the virus when it moved London and other parts of the country into the highest tier of restrictions.
On Friday, Mr Johnson said he hoped that England would not need to go into a third lockdown after Christmas, but scientists have warned that urgent action might be needed to curb the spread of the virus.
Britain reported 27,052 new Covid-19 cases on Saturday and 534 deaths, with the reproduction "R" number estimated to be between 1.1 and 1.2, meaning the number of cases is rapidly increasing.
"This is a very major concern," Jeremy Farrar, director of the Wellcome Trust and a member of the Scientific Advisory Group for Emergencies (SAGE), said on Twitter.
"Failing to act decisively now, will mean further suffering. We must keep asking ourselves 'are we doing enough, are we acting quickly enough'."
SAGE is due to meet on Monday to discuss how the current three-tiered system of restrictions could be beefed up.
"It has been apparent for some days that the virus is again out of control in parts of the country," Jonathan Ashworth, the health spokesman for the opposition Labour Party.
"The government's tiered system has failed to stem its spread."
Within minutes of Johnson’s announcement, shoppers hit the streets for a final attempt to stock up on Christmas presents and supplies.
At the giant Westfield shopping centre in West London, one of Europe’s largest, numbers were boosted by last-minute shoppers.
“It was fairly quiet all day, then suddenly there was this mass of people,” said one sales assistant at one large department store.
The UK's other nations, whose response to the pandemic differs from that of England at times, also took action.
Scotland said on Saturday it would impose a ban on travel to the rest of the United Kingdom, and the Christmas easing would be limited to just Dec. 25. All of Wales will go into Tier 4 from midnight, but two households can mix on Christmas Day.
Business leaders said the government needed to provide emergency support.
"Christmas was already cancelled for many businesses, but even more will now suffer as a result of this last-minute decision," said Adam Marshall, director general of the British Chambers of Commerce.