The deal was struck yesterday at a meeting in London between British finance minister George Osborne and his Swiss counterpart Hans-Rudolf Merz, the Financial Times and the BBC reported.
It will affect thousands of Britons with money stashed away in Swiss bank accounts but a compromise means Swiss banking secrecy will be preserved, said the FT, citing British government officials.
Britain had initially asked Switzerland to hand over information about their taxpayers automatically but it is now thought the identity of account holders will be protected, said the paper.
Final details are still under negotiation, but it is thought the same idea of raising tax revenues while protecting identities will be followed in a deal between Switzerland and Germany this week, added the FT.
Britain and Switzerland are reportedly expected to hammer out the exact terms of the new tax cooperation agreement within the year.
Formal negotiations will cover the issue of a so-called withholding tax.This would see Swiss authorities levy a tax on interest earned in the accounts of British citizens on behalf of British tax authorities, said the BBC.
Merz will meet with German Finance Minister Wolfgang Schaeuble in Bern on Thursday to discuss the tax issue, according to the Swiss finance ministry.