The decision to escalate the UK terror threat level to "severe" was a "precautionary measure" following Islamist attacks in Austria and France, Home Secretary Priti Patel said.
The change means that an attack on UK soil is now deemed "highly likely".
It comes after gunmen, believed by Austrian police to have an Islamist motive, killed three people and left several wounded on Monday night as they went on a shooting spree through Vienna armed with an assault rifle, carrying other handguns, and wearing a fake explosive belt.
The attack happened on the eve of Austria entering a coronavirus lockdown – a move England will emulate on Thursday after Prime Minister Boris Johnson announced bars, restaurants and most other hospitality venues will have to shut for four weeks until December 2 in a bid to stifle the rate of the virus' transmission.
In a statement, Ms Patel said: "The Joint Terrorism Analysis Centre has this afternoon changed the threat level from terrorism from substantial to severe.
"The British people should be alert but not alarmed.
"This is a precautionary measure following the horrific events of the last week in France and last night in Austria and is not based on a specific threat.
"We have already taken significant steps to amend our powers and strengthen the tools for dealing with the developing terrorist threats we face.
"That process will continue and the British public should be in no doubt that we will take the strongest possible action to protect our national security."
She said the country faced a "real and serious threat" from terrorism and called for the "public to remain vigilant" and to report suspicious activity.
The terror threat level was lowered to "substantial", meaning an attack was thought to be likely rather than highly likely, in November 2019.
But recent events in Austria and France have convinced terror experts that there is now a greater risk of an attack on Britain.
The Vienna incident saw several shots fired shortly after 8pm local time in a city centre street, with police identifying six different shooting locations.
Eyewitnesses reported seeing gunmen open fire on people sitting outside bars, with one suggesting as many as 100 rounds were fired.
One attacker was shot dead by police and authorities are trying to determine if others may be on the run.
In France, three people were killed in a knife attack at a church in Nice last month, and teacher Samuel Paty was beheaded in a Paris suburb amid outrage over the country's defence of cartoons mocking the prophet of Islam.
Assistant Commissioner Neil Bas, UK head of counter-terrorism policing, said officers would be deployed to "certain locations" as part of the "severe" terror threat grading.
He said: "We have activated the established planning mechanisms across the police service, which will lead to enhanced protection and preparedness.
"Some of this will be visible and involve additional police officers being deployed to certain places and locations, which the public can expect to see over the coming days.
"From this afternoon we will begin to increase our levels of visible patrols and implement other security and protection measures."
Labour shadow home secretary Nick Thomas-Symonds said: "This decision should not cause undue alarm but shows the importance of people continuing to be vigilant."
The Prime Minister's official spokesman told reporters the Vienna shootings were not discussed at Cabinet on Tuesday, but that the Home Office had offered its counter-terror expertise to "help Austria with their investigation".