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What is the New Iceland Road Tax in 2026 - Travel Tip Tuesday
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Iceland has introduced a new road tax: a per-kilometre fee that applies to everyone driving in Iceland, even tourists! Here's how much it will cost and how to pay this new road tax in 2026.
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Hey everyone and welcome back to Travel Tip Tuesday with the Travel Mug Podcast. As regular listeners know, we love Iceland, don't we, Meggan? We, we simply do We simply do. And you've done a few Iceland Road trips, is that correct? Two. Alright. Two. Yes. I've been twice and have never rented a car there. But, uh, you've done plenty of car rental in Iceland. So today I wanna talk about Iceland's new Road Tax that started at the beginning of 2026. So under this new road tax system, drivers in Iceland pay a per kilometre road tax that helps to fund road maintenance. And yes, this does apply to tourists, too. So if you're renting a car in Iceland in 2026 or beyond, listen up. I'm gonna tell you how it works. So how you pay this tax depends on the rental company that you're renting a car from. Some companies are charging a fixed daily rate that's added to your reservation. Other companies are charging you per kilometre driven. So I decided to go online and look and see what some people were doing., What they're charging right now, this is April, 2026 when we're, uh, recording this. So it's current, but I don't know what it'll be in the future. Subject to change. Thank you. So, uh, Avis and SIXT are charging, uh, 6.95 Icelandic kroner per kilometre, which is about 8 cents Canadian per kilometre, or 6 cents US dollars, or, how do I say this? cents Euro 5 cents zero. 5 cents Euro. I love it. cents Euro. I think that's, know. I'm so sorry. Um, so Cars Iceland, Lotus Car Rental and Blue Car Rental are charging 1,550 Icelandic kroner per day, which is about $17 and 42 cents. Canadian $12 and 59 cents US dollar or 10 Euro 78. So. Uh, the per kilometre rentals, you don't need to like record anything. There's nothing you have to do. The company will calculate your usage based on the odometer reading, uh, when you pick it up and when you drop it back off. So I did just wanna like give some context. So if you drive the Golden Circle, it's 250 kilometres, you're going to pay 1,737. 50 Icelandic kroner. No. Is that right? Yeah. Oh my gosh. Don't ask me to do math here, people. No currency today. People, no currency. Currency math is so hard. So I do wanna note that you might read that Icelanders need to report their car usage to the government. You do not have to worry about that as a tourist, so that's very good. The rentals will do that part on your behalf. So you're probably thinking, great, this makes traveling to Iceland more expensive. But, I have good news for you. Iceland actually reduced fuel taxes to make up for this change. So it isn't going to make it a lot more expensive as gas is now cheaper. So Meggan, I wanna know your thoughts on this. If you were going to Iceland and renting a car, would you prefer to pick a company that was offering a per day charge or a per kilometre rental? I would just do some simple calculations. So if we are doing a road trip, we always, usually just for funsies, like plot it on Google Maps, and of course there's going to be a little bit over if you're local and driving around or whatever. But I'm talking like major destinations around Iceland. I would just plot it like we did 16 and 1800 kilometres on both trips. So then we would calculate how much is that per day and how much is that per kilometre? And then probably go with one of them, but we did the calculations and , for like, let's say our last trip, we were talking about it, and we probably would've saved about $8 a day if we went per kilometre. Interesting. I think if, if it really matters to you. Um, now some people, of course, who buy like extended warranties, et cetera, will probably go with the whole per day because it seems safe. But you actually do calculations you can figure out what is actually cheaper and if that matters, I would go with that. But even before in, in instinct, before I knew how much we had driven, I thought, well, per kilometre, because I wanna be charged, what I'm actually driving for. Hmm, that makes sense. Yeah, I agree. I think that I am like slightly risk averse in the same way that I would, I would naturally go for like the the per day just so that I know exactly what I'm paying. But you're right, if you do the math and the math Makes sense. Do the per kilometre charge shouldn't do the math, have someone else do the math, but whatever. Correct. If you have someone else do the math. Don't mind me over here. Um, so that is it for this week's Travel Tip Tuesday. I hope that helped clear up some of the information out there about what this is and how it works. Let us know what you think. You can find us on social media at Travel Mug Podcast on our website, travel mug podcast.com. You can also leave us a comment on YouTube. We're there at Travel Mug Podcast. Just wherever you are, type in Travel Mug podcast, we're probably there. You can also support the show through Buy Me a Coffee. I've been having fun posting teasers for upcoming episodes for our supporters there. So if you want to hear those, come hang out with us there, and until next time, bye everyone.
