Courts will also be given powers to refuse compensation for personal injuries claimants who have been dishonest in their Compensation Claims.
The measures, announced by the Ministry of Justice (MoJ), are among several aimed at reducing insurance fraud.
Justice secretary Chris Grayling has warned insurance companies he expects the reforms to lead to lower premiums.
The MoJ is promising to legislate for the changes before the end of the current Parliament in May 2015.
If the plans become law, claims firms will no longer be able to offer potential clients free gifts, such as tablet computers, or cash.
‘Compensation culture’
New rules on whiplash claims come into force in October
At least one firm in the UK advertises a “free iPad” to clients whose claim is successful.
Another offers “an upfront cash advance of £2,000” if the party at fault admits full liability.
The news was welcomed by insurance industry body the Association of British Insurers.
“We applaud the decision to ban the distasteful advertising which offers cash or other inducements for personal injury claims,” said the body’s director general, Otto Thoresen.
“This only serves to reinforce to unscrupulous claimants that there is a compensation culture to exploit.”
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