Ekkapan Kaewkla, 26, has been charged with killing Stephen Ashton, 22, and carrying a weapon following the incident on the island of Koh Phangan.
Mr Ashton, a former city trader from Purley, south London, was enjoying New Year celebrations when he was caught in a gun-fight between rival gangs.
It is reported the suspect has been transferred to the larger island of Koh Samui, where there is a court, and has been remanded in custody.
Kaewkla was expected to spend the day in detention while the police prepared charges against him. He can be detained for 84 days.
Thai police reportedly believe they have enough evidence to charge Kaewkla with pre-meditated murder.
Britain's Ambassador to Thailand, Mark Kent, was due to visit the crime scene yesterday after footage emerged on Wednesday of Kaewkla and Thai police carrying out a reconstruction of events there.
Mr Ashton's family travelled to Koh Phangan to identify his body and arrange his repatriation.
Koh Phangan is a popular destination for backpackers and students on gap years.
Mr Kent warned of risks to western tourists, and urged people to read the travel advice on the Foreign Office website.