Will you come back from your hols?

Experts say by 2020 some four million British pensioners will be living abroad

- Pension questions? Ask the expert

Retiring abroad is becoming more common as high UK property values and pension savings levels make it an achievable goal not only for the rich.

There are around one million retired Britons living overseas. Their numbers are set to grow, with one in five of us saying we'd like to follow suit.

The Centre for Future Studies predicts that by 2020 there will be some four million British pensioners living abroad, or one in three of today's retirees.

However, there are plenty of areas to consider before making your move (apart from the weather and often cheaper cost of living!):

Income tax & double taxation agreements
Your liability to paying UK tax on total income depends on your residency status. This can change year on year, depending on how much time you spend in the country.

However, irrespective of residency status, you are liable to UK tax on any income that arises in the UK. This includes income derived from pensions, savings, property and share dividends.

With some countries, such as Spain and France, the UK has a 'double taxation' agreement - to help ensure you don't pay tax on your income twice. You will either have to reclaim it or get exemption.

You could also be liable to UK income tax on any income earned while living in a foreign country, or from foreign assets, depending on residency. You are considered a UK resident if you spend 183 days or more in the UK during a tax year.

Some countries also impose a 'wealth tax' levied annually based on assets including savings and investments held in that country and worldwide.

Your pension
The state pension can be paid to a designated bank in a foreign country.

If you spend six months of the year in the UK, you are entitled to any state pension increases. Those retiring within the EU or the US are currently given any annual increase.

Occupational and personal pensions can, in most cases, be transferred abroad, but although this removes the currency risk of the pound falling in value, transferring may be complicated.

Italy, for example, has a relatively undeveloped personal pensions market and it can be difficult to find a provider there to transfer to.

You may find your pension payments are reduced in countries where income tax is higher, such as Spain. In this case, it would be better to remain a UK resident and under the double taxation agreement, only pay tax in the UK.

If you have already bought an annuity, be warned - some annuity companies charge considerable sums for making overseas income payments.

ItÂ’s important to realise that under current legislation your state pension will not be increased once you start claiming it from many non-EU countries, such as South Africa and Australia (this applies mainly to Commonwealth countries).

Inheritance tax (IHT)
The value of your assets will be subject to the IHT laws of the country you've moved to.

IHT liability depends, under UK law, on domicility. To ensure you aren't liable for UK IHT you have to acquire a 'domicile of choice'. In other words, cut your UK ties with the demonstrable intention of making your home in another country.

You are considered still 'domiciled' in the UK for up to three years after you leave. Once considered domiciled abroad, you will only be liable for IHT on your UK assets, rather than assets held/acquired while living abroad. It's worth noting that Italy abolished IHT in 2001.

It's also very important to make out a new will, as laws covering the distribution of assets to family and non-family on death differ considerably.

Savings & investments
These can remain in the UK, but you will not be able to open ISAs once you are considered a non-UK resident and any income received from ISAs and PEPs maybe liable to tax under the laws of your new country of residence.

Capital gains tax (CGT)
You cease to be liable to CGT once you are non-resident for more than five consecutive tax years. However, your new country of residence may tax any gains depending on the CGT rules of that country.

Property
One of the biggest questions when retiring abroad is whether to buy a property. One advantage of high UK property prices, and the strength of the pound, is that you can get a lot of house for your money in many countries.

However, as in the UK, property markets have boomed in popular retirement destinations such as Spain and France, and further afield the US and Australia, and could be set to fall.

Property buying in a country whose market and rules you are unfamiliar with can be confusing, especially if another language is involved. And many, such as Spain, impose an annual property tax.

Medical provision
One of the most important areas to consider is health.

For EU countries, there is an agreement that covers the health costs of UK citizens who receive the state pension abroad. You need form E121, which will allow you the same free or low-cost medical treatment as a pensioner of the country you are in.

However, many countries in the EU will not cover all costs. In France for example, you would expect to pay around 30 per cent of health costs, such as for doctors' visits and drugs.

Top-up insurance policies are available to cover such extra costs, but they can run into thousands.

In the US, private health insurance is a prerequisite as treatment costs can be exorbitant.