Close to 60,000 British expats living on the island, along with 3,000 UK army personnel, are liable for the tax. As ATMs run out of money and limits are imposed on withdrawals, many expats have been left without cash for basic living or business needs.

The levy means that savers in Cyprus with up to €100,000 on deposit will be charged a one-off tax of 6.75%. Savers with a balance above that sum will be charged 9.9%.

UK Chancellor, George Osborne, told the BBC, that British troops in Cyrpus and Brits resident on the island serving the UK government, would be compensated for any bank tax losses.

Many expats will have moved the bulk of their savings into local banks which, up to now, have rewarded savers with higher rates of interest than could have been earned back in the UK – around three per cent was the norm. The levy is believed to affect those savers who are resident in Cyprus only.

The panic now hitting the Cypriot banking system and financial markets may see either a exclusion of the levy on small savers or a complete withdrawal.