Winter coats pulling at the back and arms: A fact of life or not?

There are people who work at these stores whose job it is to help you find the proper fit. Engage their services.

I'd say it either isn't a good fit, or it's a crappy cut, or both. A well-made wool coat (http://www.filson.com/products/mackinaw-cruiser-extra-long.10044.html?fromCat=true&fvalsProduct=mens/coats-jackets/wool&fmetaProduct=101114) shouldn't do the odd riding-up or choking you that you describe; the downside is that you may not be in the price range to get the quality of cut that you want.

If it bothers you now, return it! Do not delay. It will not start to unbother you. Look online for shops that offer tall sizes. (In the US, I would send you to Banana Republic.)

I would agree that you're looking in a price range that's too low. Material and cut will be improved at higher price points. I don't think you need to break the bank, though. As per the above I bought a wool peacoat at Banana Republic and spent around $400 Canadian and the quality was a step up from bargain retailers. I wouldn't spend less than that here - not sure what the conversion/equal spending would be in the UK but I think around double what you're looking at would be a good start. I recall an Esquire or GQ article about buying a wardrobe on a bugdet, and one of the staples they said to spend a bit more money on if you could was a good coat. If you buy a classic style it will far outlast trends and will serve you well with good materials, cut and style. Good clothing is really worth it, in my opinion. It looks better and wears harder, and you get your money's worth. If you have the means and know you'll be using it for a long time, stretch a bit to get something that fits.

XL? Sounds like it's too big. What's your chest/suit size?

I would add to the above that your typical wool coat will not afford the free range of motion that a ski jacket will allow, like someone else said above. However, I don't find that to be an impediment. How often are you raising your hands above your head when wearing it? Me, not very much. If I have my wool coat on I'm usually hands-in-pockets or drinking coffee or similar. I don't need to move like Jet Li (although I can in sweats, believe me). A wool coat's warmth comes from the density of the wool and it comes with some trade-offs.

It's too short. Look for brands that come in tall like Eddie Bauer, if that's available in the UK.

Yes, it's the fit that's the problem. A jacket sized S/M/L/XL is never going to fit you as well as something that's made for your approximate measurements and/or capable of being altered by a tailor. Military surplus will be your best bang-for-buck here. A pea coat will suit you just fine.

This is actually one of those times where charity shops (esp. in the stockbroker belt) or one of London's http://www.telegraph.co.uk/sponsored/in-the-know/london-shopping/9163197/London-designer-second-hand-clothes-shops.html may provide better pickings than M&S, especially at your budget. I got a not-terrible overcoat for that price from Burton about a decade ago, but the high street chains aren't great for this any more. As tealcake says, you will get a bit of ride-up on an tailored overcoat if you raise your arms above horizontal, no matter what; peacoats are a little more accommodating than suit-coats, but not hugely. (And the Royal Navy isn't as good for surplus or used coats as its US equivalent.)