It must be a 'life peerage' - that would require an Act of Parliament to remove.
Archer was sent to Belmarsh Prison, a Category "A" prison, but was moved to Wayland Prison, a Category "C" prison in Norfolk, on 9 August 2001. ...
On 21 July 2003, Archer was released on licence, after serving half of his sentence, from Hollesley Bay. Archer was allowed to keep his peerage as it is a life peerage rather than "an honour under the Crown". An Act of Parliament would be required to enable such a change to someone's peerage.
Wikipedia: Jeffrey Archer # Prison
Presumably he retained his seat in the House of Lords:
... an act of parliament is required to revoke a peerage.
Andrew Mackinlay, Labour MP for Thurrock, has tabled a Commons motion calling on the government to legislate to disqualify peers imprisoned for criminal offences from sitting in the Lords. The Archer saga endorsed the case for an elected second chamber, he said.
"Not only is it an undemocratic place, but you could commit murder and when you get out of prison you could still go back into the House of Lords," he said. ...
"If a member of the House of Commons had been sent to prison for a similar crime yesterday he would have to forfeit his seat. "Why do we extend to the glitterati, the rich and the powerful, all those people in the magic circle which runs this country, the privilege of going back to parliament after they have come out of prison?"
Disgraced Archer may lose peerage, The Guardian, 20 July 2001
I'm not sure how the law has now changed, but I think the article above reflects the law in the late '90s, when the Potter saga is set.
The situation would be much easier if he were 'Sir Thomas Voldemort':
Mr Goodwin lost his honour for “services to banking” despite not having been convicted of any criminal offence nor being professionally censured, the normal requirements for annulling a knighthood, CBE, OBE or MBE.
Fred Goodwin is shredded: former RBS boss stripped of knighthood, Robert Winnett and Rowena Mason, The Telegraph, 31 Jan 2012
Alternatively, it could just be to make the apophasis clearer. If you say "The Dark Lord" then it's a bit clearer who you mean than if you say "you-know-who" or "thingummy-bob".