A gas-guzzling Mustang or a green Prius? That is the taxing question...

WITH road tax set to soar for most new cars after April 1, you could save a small fortune by registering your vehicle before the end of this month.

The current Vehicle Excise Duty (VED) system was designed to encourage carmakers to develop greener vehicles. But it has worked too well. New technology has led to CO2 emissions plunging, and up to a quarter of new cars now have emissions so low that their owners pay no VED at all.

Even cars in the next two brackets up are VED-free for the first year, and pay only £20 or £30 a year after that. It’s costing the Exchequer millions, so from next month it all changes. The small, efficient cars that benefited most from the old system will be hit the hardest in proportion to their current tax bill and their list price.

Under the new system, almost all cars registered after April 1 will pay a flat rate of £140 per year. There will be a discount of just £10 for the few that run on bioethanol or LPG, and only pure electric cars will escape the flat rate.

Cars costing more than £40,000 will pay an annual supplement of £310 for the first five years. That includes expensive electric cars such as Teslas.

In addition, the first-year charges have been hiked. Nearly all cars that currently go tax-free will have to pay at least £100 in the first year, and the £140 flat rate thereafter.

The most polluting vehicles will also be hit hard initially, with their first-year rate soaring from £1,120 to £2,000.

But after that, a dirty but cheap car such as the Ford Mustang V8, above, will be among the few winners. Its annual VED rate could fall from £515 to the standard £140, delivering a net saving by the third year.