The exporter-heavy FTSE 100 surged 1.6 percent, extending its more than 1 percent rally on Tuesday ahead of the vote, while the FTSE 250, which is more domestically focused, climbed 0.7 percent.

All the sectors in the main index ended the day in positive territory as the FTSE 100 is often boosted by a weaker domestic currency because its multinational companies earn a big portion of their revenue abroad in foreign currency.

Dollar earners British American Tobacco, GlaxoSmithKline, Diageo, Imperial Brands all advanced.

Combined with gains in oil majors Shell and BP on higher crude prices, that helped the FTSE 100 outperform European peers where caution dominated ahead of U.S.-China trade talks and the Federal Reserve's policy guidance.

The mid-caps were on course for their strongest month in five and a half years and the FTSE 100 was on track for its biggest monthly gain since last April.

Luxury goods maker Burberry also climbed 3 percent after Paris-listed rival LVMH's strong results lifted some of the gloom around the luxury sector.

Britain's parliament rejected a proposal to give parliament a path to prevent a potentially chaotic "no-deal" exit, but accepted two amendments - one seeking to replace the Irish backstop with alternative arrangements, and another rejecting the notion of a "no-deal" Brexit.

Following the vote, Goldman Sachs nudged up its estimated probability of a "no-deal" Brexit to 15 percent from 10 percent.

"The vote is not fundamentally changing the way the market’s talking about Brexit," said Hetal Mehta, Legal & General Investment Management senior European economist, adding Tuesday's drop in sterling wasn't a big move.

"But we've got a lot of work to do and not much time to do it. We risk running out of time," she added.

With less than two months to exit the EU, the default is still for the UK to crash out without a divorce deal, which would shake financial markets and cause major disruptions to businesses.

M&A drove some big moves in the small-cap area.

Ophir Energy jumped 6.9 percent to a six-month high after agreeing to be bought out by Indonesian oil and gas group Medco for a sweetened bid of 390.6 million pounds in cash.

Video advertising firm Taptica International surged 14.9 percent after saying it was in advanced talks to take over rival RhythmOne in an all-share deal. RhythmOne however slumped 12.2 percent.

Wizz Air shares took a U-turn to add 2.4 percent as investors digested a third-quarter report in which the budget airline reported a jump in revenue and stuck to its profit guidance.

Metro Bank sank 9.1 percent to the bottom of the FTSE 250, hitting a new record low as it extended losses after last week's profit warning.

"They've been terrible since horrendous profit warning last week, so existing longs getting out, I would think," said a trader.

(Graphic
: FTSE performance since Brexit referendum link:

(Reporting by Josephine Mason, additional reporting by Muvija M; editing by Helen Reid and Andrew Heavens)

By Josephine Mason and Muvija M