British taxpayers who have money stashed in Swiss banks could see a significant chunk taken by the Treasury after a deal was struck between the two countries.
The Treasury suspects some UK residents have not paid enough tax
Existing account holders could be hit by a one-off deduction of between 19% and 34% in an attempt to settle any tax they owe.
Those who have already declared the full details of where their money is and paid their taxes should be unaffected by the plan, which could raise £5bn for Treasury coffers by 2015.
It is difficult to forecast how much it will bring in over the long term as British depositors in Swiss banks may rearrange their finances in response to the move.
Chancellor George Osborne said the agreement heralded the end of an era when it was "easy to stash the profits of tax evasion in Switzerland".
UK residents with money in Switzerland will also be affected by a new tax deducted at source, which will be 48% on investment income and 27% on gains.
George Osborne said the wealthy must pay their fair share
The two countries have agreed to share more information and, as a gesture of good faith, Swiss banks will make an up-front payment to the UK of £384m.
The country is keen to shed its image as a safe haven for money that has not been properly declared to HM Revenue and Customs in the UK.
"Tax evasion is wrong at the best of times, but in economic circumstances like this it means that hard-pressed, law-abiding taxpayers are forced to pay even more," Mr Osborne said.
"That is why this coalition Government made it a priority to go after those who don't pay their fair share.
"We will be as tough on the richest who evade tax as on those who cheat on benefits."
There is a stark choice for those who have abused Swiss banking secrecy - come forward and disclose, or run the risk of losing over a third of your historic Swiss assets.
Paul Harrison, KPMG's head of tax investigations
The deal is politically significant because the coalition wants to demonstrate its cuts to some benefits are being matched by equally stringent policies affecting the rich.
Describing it as an "historic" announcement, Exchequer Secretary to the Treasury David Gauke said too many people had abused Swiss banking secrecy.
"The message is clear: there is no hiding place for tax cheats," he added.
However, experts warned wealthy UK residents may simply transfer their cash elsewhere to avoid paying up.
Chris Oates, head of Ernst and Young's tax controversy team, predicts more people will move their assets to Liechtenstein.
"This will undoubtedly provide a much-needed boost to the UK's finances. It is expected to generate billions of additional tax flows to the UK Exchequer," he said.
The coalition wants to show it is targeting rich cheats, not just benefit claimants
"But HMRC will miss an opportunity to establish whether these individual cases are involved in much wider tax evasion as it will only be based on Swiss assets."
KPMG's head of tax investigations, Paul Harrison, said the move was "very significant".
"It seems there is a stark choice for those who have abused Swiss banking secrecy - come forward and disclose, or run the risk of losing over a third of your historic Swiss assets," he explained.
"But the authorities need to take care that the innocent and the confused do not get caught up in this.
"There will be people who simply don't know whether they have a problem and they will need help to sort their affairs out."
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