More than 74% of Britons want to retire abroad according to new research by accountants and business advisors, PKF. But also, almost 1 million people are working beyond the normal retirement age in the UK, according to the latest government figures.

So, if you're returning from holiday with dreams of cashing in your UK home to live out your dotage in sunnier climes - you should make sure your finances are in order before you set off.

Never before has moving abroad been so popular: 500,000 Britons now own homes in France, lured by the fine food and wine, relatively cheap housing and attractive way of life but most people underestimate the amount of money they will need to live comfortably.

Charles Parkinson, author of 'Taxation in France' and a tax partner at PKF suggests the following financial checklist for those people considering waving goodbye to traffic jams and NHS queues.

1. How does the cost of living compare to the UK?
Apart from simple price differences, local VAT or sales taxes vary considerably – even within the EU. Inflation may be a factor, especially if you will be living on a fixed income – we are used to a low inflation rate in the UK but in some countries the rate of inflation is still very high.

2. What about your pension?
It will usually be taxed in the country in which you will be living and, if that country has a comprehensive double tax treaty with the UK, it will not be taxed in the UK – unless your pension is paid in respect of services with the UK Government. Bear in mind that under the current rules your state retirement pension may not be increased once you leave the UK.

3. What will happen to your savings?
You can leave your savings in the UK. You may not have to close your PEPs and ISAs, and they may continue to attract tax privileges in the UK, but they will not benefit from tax exemption in the country to which you are moving.

Moving abroad may offer an opportunity to wash out gains in your investment portfolio tax-free, since it may be possible to arrange your move so that for a period you are 'resident nowhere'.

For example, if you move to Spain and leave the UK on 5 April 2004 and travel via France, arriving in Spain on 10 April 2004, any gains on your portfolio shareholdings realised during the four day 'tax holiday' between these dates will be free of CGT (unless you resume tax residence in the UK within five years).

4. Will you pay tax on your savings?
Most countries tax investment income as well as earned income, and some even impose an annual wealth tax on the value of your assets. You will need to check the local rules very carefully to assess the impact on your spendable income and where it is best for your investments to be held.

5. What about personal tax?
Personal tax rates in the UK are not very high compared to the rest of the EU and many other countries (when you take into account regional and wealth taxes). It is wise to assess what your net income will be for at least the first five years of living abroad.

PKF publishes a worldwide tax guide each year that gives an overview of the tax regime in most countries.

6. What if you want to come back to the UK?
You can visit the UK for up to six months in any one tax year but not more than three months on average (over any four-year period) without breaching the test for tax residence in the UK. However, regular visits may indicate that you have not severed all links with the UK and it may be difficult to establish that you are not domiciled in the UK for inheritance tax (IHT) purposes.

7. To buy or rent?
There can be disadvantages to buying a home. For example, the value of a house that you own may be subject to an annual wealth tax. Property purchase taxes can often be higher than the stamp duty equivalent in the UK. France, like many other countries imposes strict succession rules that mean that your children are entitled to a share of your estate when you die. Renting can help to avoid this issue.

8. What about inheritance tax?
The value of gifts or legacies from your estate is likely to be subject to IHT either in the UK, if you remain domiciled in the UK, or in the country to which you move (but not in Italy, which abolished IHT in 2001).

Even if you remain domiciled in the UK, the value of your assets in the other country is likely to be subject to local IHT. In that case, the UK will give credit against UK IHT for any foreign IHT paid.

However, there are often differences between the tax systems, which greatly reduces the protection from double taxation that this credit affords. An example of such a difference is that gifts between husbands and wives are exempt from IHT in the UK, but are often taxable in other countries.

9. What about insurance?
Existing policies in the UK should be reviewed to see if a change of tax residence affects the benefits that you might receive. You should investigate the question of insurance in your chosen country; it may be expensive to change your arrangements at retirement age.

If you are moving to France, the proceeds of foreign life assurance policies are taxed under less favourable rules in France, so it may be worth replacing any UK or offshore life policies with French ones if you are moving there.

10. Don't forget to make a will
It is always a good idea to keep your will up-to-date and it is advisable to make a new will in the country that you move to - if only for administrative convenience. An English will may be valid in that country if it was validly made under English law, but only to the extent that it complies with local 'forced heirship' rules.

Your heirs will have to produce a certified translation of the English will, and probably an English legal opinion that the will is valid under English law. It will generally be simpler to make a local will. If you retain assets in the UK, you should maintain a UK will and ensure that the two wills are not in conflict with each other.

Charles Parkinson says: "Retiring abroad is a dream for many but is neither simple nor straightforward. Aside from the financial aspect there are other lifestyle issues which are just as important - speaking the language, the healthcare on offer, travel arrangements and safety, to name just a few.”

“If early retirement is too much of a financial strain, from 2005 people will be able to draw their company pension while continuing to work for their employer part-time and in a different role. It might not be their dream but it might be a more realistic alternative."

'Taxation in France – a foreign perspective', can be obtained by phoning 0207 782 9335

PKF can advise on aspects of UK tax and financial planning for budding expats. Through the PKF network, we can put you in touch with our experts in the country you finally choose. For more information visit www.pkf.co.uk