Just bought a peugeot 206, 1.4 hdi (diesel) - tax is £35 for the year, and insurance is cheap too.
Renault megane - approx same size, small engine you get cheap tax and insurance too.
Rover 25s are good, but beware of servicing as Rover gone out of business and some parts can be hard to get hold of.
Vauxhall astras are nice too!