How to beat the budget car tax increase

You can still buy a family car or even a 4x4 without paying high car taxes and destroying the planet. Under the new CO2 rules, buy a BMW 3 series or a VW Golf and you could pay up to £750 in tax - or nothing at all



In the short term, the big losers are those driving large petrol-engined cars. Over the next two years they will see their annual road tax bill climb by between £100 and £200.

However, the real shock will come in 2010, when new car buyers face the so-called showroom tax - a higher road tax in the first year that reflects the car's CO2 emissions.

Cars that emit more than 255g of carbon dioxide per kilometre, such as the Ranger Rover Sport and any Ferrari, will come with an £950 bill for the first year's tax - a significant sum, although short of the £2,000-£5,000 demanded by environmental groups.

At the other end of the spectrum, anyone buying a brand new car in 2010 that emits less than 165g of CO2/km will get the first year's car tax for free.

This group includes most small- and mid-sized cars, and also what many would consider some quite serious cars. The BMW 3 series 2.0 litre diesel car, emits just 128g/km, and after the first year the road-tax bill will be just £35 a year.

Compare that to the same model, a 3-series with a sporty 3.5 litre petrol engine, and the bills are quite different. In the first year the buyer will pay £550, and £310 a year from then.

These anomalies will apply across all the manufacturers' ranges of cars. In short, the new regime favours those who are happy to downsize or switch to diesel.

Take the Toyota Avensis estate. By 2010 a petrol 1.8 will cost £210 a year to tax, while the slightly larger diesel (2.0 litre) will cost £125 a year because it emits less C02. In comparison, the tiny Citroen C1 and the like will cost just £20 to tax, from March 2009 onwards

If you are buying a used car now, you need to look closely at what you'll be paying to tax your chosen model in the future.

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