This is the flag of Fascist Britain. It comes from a world where the Central Powers won World War I. Following the war Britain and France were placed under a series of harsh reparations just as Germany was in our world. Britain didn't face reparations nearly as bad as France did, but nevertheless it put considerable strain on the nation. As a result the Fascist Party, led by Oswald Mosley, began to gain traction. The Fascist promised revenge against Germany and the Austro-Hungarians for the humiliation Britain had suffered following the war.
A surprise terrorist attack on Parliament was the opening the Fascists needed to cement their control on the British government. It has been speculated by historians that this attack may have been staged by the Fascists themselves; but whatever the cause it was enough for most of the British people to get behind the new government. The Royal Family fled to Canada and set up a government-in-exile to oppose the Fascists.
The British colonies typically had one of three responses to the coup. Some happily swore alliance to the new government, others chose to follow the government-in-exile and a few declared their independence. Although authoritarian, Fascist Britain wasn't outright genocidal towards minorities like France was. For instance, there was at one point a bill in Parliament that would have severely restricted the rights of Jews, Catholics and Atheists. Thankfully it failed, albeit just barely. Fascist Britain can be thought of as more similar to Mussolini's Italy than Nazi Germany.
Despite a grueling Second War World eventually the Entente powers were defeated by combined German, Austro-Hungarian, Japanese and American forces. Before long the Mosley regime was overturned and the rightful government returned to the British Isles once again.
The flag is a modified version of the English St. George's flag. The black stands for Fascism and in the center is the symbol of the British Union of Fascists.