HMRC's top taxman Dave Hartnett is targeting offshore tax dodgers
The maximum penalty for offshore tax dodging will double to 200% of the unpaid tax, the government has announced in its pre-Budget report.
The plan is one of 14 separate new measures announced aimed at saving as much as £5bn in lost tax every year.
At the moment the maximum fine that can be levied by HM Revenue & Customs (HMRC) is 100%.
HMRC also revealed an estimate of tax evasion for the first time, saying it cost £40bn in 2007-08.
"Legislation will be brought forward to ensure that those who fail to declare offshore tax liabilities will face the tough penalties attracted by deliberate tax evasion," the government said.
"There will also be a new requirement to notify HMRC when opening offshore bank accounts in certain jurisdictions, supported by a separate penalty regime.
"Evading tax offshore could therefore result in combined penalties of up to 200% of the unpaid tax," it added.
HMRC is currently in the middle of a second offshore "disclosure opportunity".
In this campaign it is encouraging people who have hidden money and assets in the offshore accounts of about 308 banks to come clean and agree to pay up.
If they confess by the recently extended deadline of 4 January 2010 then their penalty will be limited to just 10% of the unpaid tax, going back to April 1988.
But they will still have to pay interest on the unpaid tax.
A first campaign in 2007 flushed out about £450m from about 45,000 customers of five big High Street banks and two other ones.
"This is the last chance for offshore tax evaders - if they do not come forward now, they can expect much tougher penalties in the future," the government warned.
Paul Harrison, UK head of tax investigations at accountants KPMG, said his phones would now be "red hot" from clients wanting to pay up.
"It seems there is an even bigger stick on the horizon now, and time is running out.
"HMRC will be receiving information from as many as 300 financial institutions which will lead them to those individuals with offshore bank accounts," he added.
The new 200% maximum fine will be enacted through next year's Finance Bill following the 2010 Budget.
The fine will effectively come in two halves, an HMRC spokeswoman said - 100% for not letting HMRC know about the money, and a further 100% if the evasion was deliberate.
The new penalties will come into effect in 2011.
"We want to give people an incentive to pay up sooner rather than later," the spokeswoman said.