"Iran has been carrying out covert ballistic missile tests and rocket launches, including testing missiles capable of delivering a nuclear payload in contravention of U.N. resolution 1929," British Foreign Secretary William Hague told Parliament.
Resolution 1929, passed by the U.N. Security Council a year ago, tightened sanctions against Iran imposed over its nuclear program, which Western countries say is aimed at building a weapon. Tehran says the program aims to generate electricity.
The United States and European Union also tightened sanctions against Iran last year.
Hague said Iran had announced plans to triple its capacity to produce 20% enriched uranium, levels "far greater than is needed for peaceful nuclear energy."
Iran is in the midst of a 10-day military exercise. On Tuesday it test-fired 14 missiles, including some it says are capable of hitting its arch foe Israel and U.S. bases in the Middle East. It says, however, that the missiles cannot carry nuclear payloads.
"None of the missiles tested by Iran is capable of carrying a nuclear warhead," Foreign Ministry spokesman Ramin Mehmanparast told Reuters, responding to Hague's remarks.
During the war games, state television has aired footage of Iranian-made surface-to-surface Shahab missiles, with a maximum range of 2,000 km (1,250 miles).
The country's longest range Shahab-3 ballistic missile, first tested in 1998, is based on a North Korean design improved with Russian technology. Israel has long accused Iran of working on a long-range missile, the Shahab-4, which would be able to reach Europe. Iran denies any plans to build such a missile.
The United States and Israel have not ruled out military strikes on Iran if diplomacy fails to persuade Tehran to halt its sensitive nuclear work.
An Iranian lawmaker said Iran would "soon announce more military achievements."
"Iran has taken major steps in terms of military and defense achievements ... Hopefully in the near future new missiles will be unveiled," Kazem Jalali told the official IRNA news agency.