Basic UK bank accounts have been given an overhaul as the treasury agrees a deal with the country's major banks.

Under a new fee-free model, customers will not be hit with charges if they fail to have the funds in their account for a standing order or direct debit payment. It will launch by the end of 2015.

Previously, some account holders were hit with a fine of up to £30 if a standing order or direct debit payment bounced, with the penalty rising if the fine went unpaid.

Nine high street banks have signed up for the new agreement: the Co-operative Bank; HSBC; RBS Group (NatWest and Ulster Bank); Barclays; Lloyds Banking Group (Halifax and Bank of Scotland); Nationwide; Santander; National Australia Group (Clydesdale and Yorkshire); and TSB. Combined these banks account for 90% the UK current account market.

Andrea Leadsom, Economic Secretary to the Treasury, said that the deal would give basic account holders "certainty and clarity".

"It will end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed," she added.

"Ending this unfair situation is a real step forward for the banking industry's most vulnerable customers and improving access to banking is a key part of our long-term economic plan."

Anthony Browne, chief executive of the British Bankers Association (BBA), said: "These basic accounts will make it easier for more people to manage their money. They will have many features that will help people to budget, pay bills and save up."

The reformation comes after the EU agreed a directive earlier this year which means that all its member nations must offer its residents the chance to open up a basic account with fees that were fair.