This is where budget smartphones get interesting. Cheap but clever phones until now have mostly been Android handsets. Apple’s policy so far, though this may change, has been to launch its latest flagship at top price and sell last year’s model more cheaply. And Windows Phone handsets have aimed more at the mid-to-high part of the market.

But Nokia’s newest baby sells for £99.99 on pay-as-you-go and will be free on tariffs as cheap as £7 a month. And though there are some services and features that are not top end, this is a cute, impressive phone that looks much classier than the price tag. Nokia's gift with high-end handsets has been evident for decades, but the company is now proving it can make budget phones that are better built and specced than its rivals.

Start with the styling. Nokia calls it a pillow design: plonk it face down and every corner you see is curved and angled, a bit like a pillow. And it comes in fantastic bright colours: yellow, red, cyan, or black and white. The matte finish feels great. If you tire of one colour you can swap the case for another, and Nokia has colour-matched the background screen to the case so you can change the icon colour if you wish.

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When it comes to Windows Phone handsets, the skills of HTC and Samsung notwithstanding, nobody is delivering the goods like Nokia. From the high-end Lumia 920 down to this entry-level model, there’s a strong combination of styling, features and dedicated Nokia apps like Maps.

Nearly all smartphones have GPS built-in, but using them abroad involves data traffic costs which build up fast. With Nokia you can download maps free before you go and use the phone as an excellent satnav with data, and data costs, turned off. Although Maps, as it’s called, doesn’t give you turn-by-turn navigation and searching for landmarks may require a temporary data connection. And the maps aren’t as attractive as Apple’s, or as comprehensively detailed as Android’s. Even so, this is a better solution for overseas use than its rivals.

And for those turn-by-turn directions you can use Nokia’s own Here Drive, though only in the UK. Here Drive is a powerful and effective satnav: in my tests it knew about recent road changes in my area that had eluded me, as I discovered when I overrode its suggestions…

Microsoft’s Windows Phone operating system is still underrated: it’s slick, attractive and easy to use. It avoids the app-centric interface of Apple’s iOS and Google’s Android, presenting you with a ribbon of live tiles which update themselves automatically. It’s not quite intuitive but when you’re used to it, it’s satisfying and enjoyable.

Of course, at this price, some things did get left out. There’s no 4G connectivity, for instance, though this is something that won’t matter to everyone. Besides, if you’re not on EE then 4G won’t be applicable for a month or two yet.

Storage on the phone is limited to 8GB – not much if you’re storing music and video. But you can expand this with the micro SD card slot built-in if you need to.

The 5MP camera is no match for models on higher-end phones and it noticeably lacks a flash. But if you've seen the bleached-out results that flash delivers, you may be grateful for that.

And it includes what Nokia calls lenses, the special effects filters which work so well on the Lumia 920 and other phones. There are multi-shot effects so you can delete somebody who’s wandered into a shot.

There’s one other handy feature worth mentioning: you can use the phone with your gloves on or with long fingernails. This is a rarity among touchscreens which is mostly limited to Nokia and its higher priced phones.

Beyond that, there’s decent battery life, excellent call quality and even the free Nokia Music streaming programme.

Nokia is on top form with the Lumia 520 and deserves to have a big success on its hands.

@davidphelan2009