Taylor, a former warlord accused of triggering a 14-year civil war in Liberia and of backing rebel forces known for hacking the limbs off civilians in Sierra Leone, was arrested in March in Nigeria and is being held in Sierra Leone's capital Freetown.
Sierra Leone and Liberian President Ellen Johnson-Sirleaf had asked that Taylor's trial be held outside West Africa for fear of unrest.
The Dutch court agreed to host Taylor's trial, but only on condition he carry out his sentence in another country.
On Thursday, Britain's foreign minister told the BBC that the decision shows Britain's "commitment to international justice."
"I was delighted to be able to respond positively to the request of the United Nations secretary-general, that, should he be convicted, Charles Taylor serve his sentence in the U.K.," Margaret Beckett said.
Beckett said new legislation would be required to carryout the agreement.
A former colonial power in Sierra Leone, Britain sent troops to the capital Freetown to help oust rebel forces in 2000.
Taylor faces 11 counts of war crimes charges for murder, rape and recruiting child soldiers, Reuters reported, and has been held in Freetown since he was captured trying to escape extradition from exile in Nigeria in March.
The former president and warlord is under guard of U.N. soldiers from Mongolia, Reuters reported.
Though she agreed that security should come first in Taylor's trial, Corinne Dufka, West Africa team leader for Human Rights Watch, said holding the trial abroad could rob Sierra Leone's citizens of closure.
"There is such a strong belief in Sierra Leone that powerful people are above the law," she said. "That Sierra Leoneans will not witness his trial I think is unfortunate."
