Fancy some sun, sand and sea – and all tax-free?

If you're keen to up sticks and make a permanent new home overseas, you'll be keeping very good company indeed. More than 200,000 Britons – many of whom are retirees – turned their back on their home country last year, a record number according to the Office for National Statistics.

The excuse for an exodus? Perhaps unsurprisingly for long-suffering inhabitants of this damp isle, the hunt for more clement weather is one of the most cited reasons for departing these shores. Cut-price property continues to draw many, while a more laid-back lifestyle and culture also scores highly.

But not far behind these most oft-cited reasons lies a host of others unrelated to temperature and lifestyle – financial flexibility and tax.

"More than 200,000 Britons – many of whom are retirees - turned their back on their home country last year."

For entrepreneurs, wealthy retirees or individuals simply looking to shelter as much of their hard-earned money from Revenue & Customs, it's no surprise that the temptations of a tax-free haven – from Monaco to the Cayman Islands, or Jersey to Belize – lure many away from the heavily-regulated British tax system.

Who could resist the absence of personal income tax in Monaco, for example, or no pension tax in Panama (or a paltry 5 per cent on your retirement in Cyprus?) Such tax rates can make an enormous difference to your standard of living and help make a move worthwhile but, explains Isabelle Mulroy, senior tax manager at Coutts, there's an awful lot of homework to do before any relocation. "Even if tax is not the principal reason for your departure, you must be sure that you understand exactly how you will be taxed in your new location," she says. "Some countries may well have lower rates of income tax and capital gains tax - but impose other taxes not known in the UK, for example, an 'annual net wealth tax'."

Such a wealth tax exists in Spain where the unwary can easily find themselves paying an annual tax equivalent to 0.5 per cent of their worldwide assets. Similarly, those anticipating lower inheritance tax in new overseas home often fall headfirst into a tax trap. For example, a husband and wife who decide to transfer assets between each other but who now live in France and Spain, can attract an IHT charge of roughly 30 per cent. In Britain, of course, there's no IHT to pay at all on such an arrangement. "As a general rule, it's not enough to become non-UK resident if you're looking to save inheritance tax," adds Ms Mulroy; "You must also become non-UK domiciled."

Becoming 'non-UK domiciled' is one of the most crucial factors for anyone considering leaving Britain; you have to visibly demonstrate that you've abandoned the UK for good. Typically, most sell their house or rent it out – and make very few visits back during the first couple of years. "Losing the domicile you were born with is very difficult and involves demonstrating that you have emigrated permanently to another country and cut all ties with the UK," Ms Mulroy says.

For instance, let's assume you enjoy four homes in different countries – and successfully avoid having a 'tax home' in any of them since you manage to spend three months a year in each of the locations. Whilst this is technically possible, the UK taxman takes a very dim view of this and if you continue to return to the UK for three months each year, is likely to argue that you have not, actually, "left" the country – and can sting you with taxes accordingly.

Don't forget that you're treated as 'resident' for tax purposes in the UK if you're in the country for an average of 91 days or more in a tax year – worked out over a maximum of four consecutive tax years. While anybody who is moving overseas permanently is unlikely to break the principal first rule - that if you're in the UK for 183 days or more in a tax year, you're a 'resident' for that year for tax purposes – it's a key benchmark for anybody thinking of mixing an overseas lifestyle and regularly visiting family left behind.

It's this very personal element, Ms Mulroy says, that needs to be nurtured by those who relocate abroad. "Make sure that all your family are committed to the move; it's often much more difficult for partners and children." This is particularly the case for the spouses of working partners who will spend plenty of time at home while their partner is in the office.

It's also worth remembering that a place that makes a great holiday location will not necessarily make a great home, she stresses. "Many so-called 'tax havens' are small and can become very claustrophobic if you live there full-time." An old adage has it that you should never let the 'tax tail' wag the dog – that letting the taxman's behaviour influence your decisions isn't always healthy.

"You have to visibly demonstrate that you've abandoned the UK for good."

Waving goodbye to a close-knit network of family, friends, neighbours and way of life built up over many years, simply to avoid pay too much duty, can be both a personal and cultural shock to the system. And while there may be no or negligible tax to pay, the cost of living can be significantly higher. "Do you really want to restrict your ability to enjoy those profits purely for tax reasons?" asks Ms Mulroy.

Any move overseas will, of course, involve a Herculean effort from you. From the endless list of administration – to sort out everything from getting private and state pension payments paid into a new bank accounts to securing visas, a valid driving licence and establishing legal property rights in your new home country – to the emotional upheaval of departing Britain, there will be many demands made that may make you think again.

But despite the hard work and homework before you go, the end result is nearly always worth it. Whether it's quality of life or simply a move to protect your assets, the benefits of a new culture and climate will usually outweigh those comforts left behind – and bring with them a whole new set of riches, both material and for the mind.

Bon voyage!

By Sam Dunn