UK citizens holding money in Swiss accounts will pay tax at 50 per cent under a deal to declare and legitimise undeclared cash, the Financial Times reported, quoting an unnamed source. The move follows a recent programme to make a similar pact with the tiny state of Liechtenstein.

The agreement is expected to be unveiled this month, the newspaper said.

HM Treasury told this publication that discussions with Switzerland and interested parties were "ongoing" but did not elaborate. 

A sum of £3 billion (around $4.98 billion) will be raised during the course of the UK parliamentary term – which runs to the spring of 2015 – and people will also pay a one-off retrospective levy in recognition of unpaid taxes in the past.

Switzerland’s centuries-old tradition of banking privacy, which has been a shield both for people hiding illicit funds and those hiding from oppression at home, has come under increasing assault in recent years from Group of 20 governments such as the UK and US as they have sought to stem revenue outflows. In the case of Germany, for example, its authorities have even resorted to buying stolen private bank data to track down alleged tax evaders, raising questions about respect for due process of law.

The stakes for different nations are high: cash-strapped governments such as the UK hope to recover revenues, while the Swiss may see the agreement as an opportunity to throw off the label of tax haven and avoid more damaging clashes with foreign governments. Banking and finance account for about 12 per cent of Switzerland’s gross domestic product. Tax evasion is not treated as a crime under current Swiss law, in contrast to the position of many countries; tax fraud is an offence, however.

The FT report said uncertainty over the Swiss position regarding the UK may have held back the usage of the current UK-Liechtenstein tax disclosure facility, which has nevertheless been seen as a relatively successful exercise. The newspaper said the UK Treasury is considering extending the Liechtenstein disclosure facility by a year, to 2016, as it recognises the uncertainty over the Swiss deal may have inhibited tax evaders from coming forward.

The imposition of a 50 per cent withholding tax on income from Swiss accounts is in line with the goals announced by the UK and Swiss governments last October, when they said they were “striving towards co-operation which will have an effect equivalent to the outcome which would be achieved through an agreement to exchange information automatically,” the report said.