Purchasing an environmentally friendly new vehicle can reduce your annual road tax

Purchasing an environmentally friendly new vehicle can reduce your annual road tax expenditure to between £0-£30. This is because cars registered from March 2001 are taxed on carbon emissions, rather than engine size as for older models. The trick therefore is to buy a vehicle with emissions no higher than 120g/km.

The good news is that environmentally friendly cost cutters can choose from a wide variety of capable vehicles. These include the Toyota IQ 1.0 VVT-I manual which is free to tax as its emissions are only 99g/km. Higher specified models are also very efficient so the 1.33-litre Multidrive can be taxed for only £30. Motoring.co.uk's new car database reveals the Toyota IQ is listed with 'buy safe' sellers from £9,940.

Alternatively, motorists who fancy a modern hybrid can slip behind the wheel of the Toyota Prius. The latest third generation variant is available with a 1.8-litre diesel/electric motor combination which returns an average of 72mpg. This means annual road tax costs precisely zero as its emissions are only 89g/km. Toyota's environmental champion is listed in the new car database for £19,450 - £26,635.

Further cheap to tax vehicles include the frequently overlooked Kia Picanto, the stylish Citroen C1, and eternally popular Ford Ka. These toy-sized urban dwellers all proudly wave the low emissions flag so basic models can be taxed for either £20 or £30.