From the start of next month the Government has introduced a new car taxation system which changes the way car tax is calculated when you buy a new car and changes the way your annual road tax rate is calculated on your new car from then on. The new system is based on the Carbon Dioxide (CO2) emissions from the car engine. It has been introduced to encourage us to buy and drive cleaner cars.

For some new cars this change will mean that the buying price will increase and so too will the annual rate of road tax. For others the prices and annual costs will decrease. And that's why you need to give more attention to the car's CO2 figures rather than the horsepower or engine size from here on.

The changes will mean that some cars are better value in terms of buying price and long term running costs if bought before the July 1st deadline. If you are thinking about buying a 1.4 litre or 1.6 litre petrol engine car then you have to move fast. The same message applies to those who want to buy a diesel powered 4x4. Many of these cars and 4x4's will rise in price post July 1st and the annual road tax rates will double in some cases to a maximum of €2,000 per year.

When you buy a new car you are taxed in two ways. Your new car is taxed at source with what is called the Vehicle Registration Tax (VRT). When you register the car you pay road tax.

The VRT is an important source of revenue for the Government. It yielded €1.3bn in 2006 and is estimated to yield €1.4bn in 2007. It provides around 3% of the total tax receipts and most of the VRT is derived from passenger cars. The Government has made the changes with a degree of caution in order to ensure a neutral impact on its income. But it does seem fair.

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