It is an offence to alter, re-arrange or misrepresent the characters on a number plate in a way that makes it difficult to distinguish the registration number of a vehicle.
Offenders are liable to a maximum fine of £1000, they also risk having the registration number withdrawn permanently from use and the vehicle may fail an MOT.
What action will be taken if I am caught with an illegal number plate?
You could be given a £100 non-endorsable Fixed Penalty Notice for "Registration Mark not conforming to Regulations" or for minor infringements the issue of a Vehicle Defect Rectification Scheme (14 days to have the issue resolved or face a Summons to Court).
In the extreme, a report can be submitted on top of the above to DVLA, who can then revoke the registration number in question. In the case of personalised plates, this is likely to cost the owner many £100 if not £1000's in lost plate.