Iceland New Road Tax 2026: How It Affects Renting a Car

Iceland’s new 2026 kilometer road tax explained. Learn how it affects car rentals and how Icerental4x4 keeps pricing simple and transparent.

Starting in 2026, Iceland is introducing a new kilometer-based road tax that changes how road usage is funded across the country. If you’re planning to rent a car in Iceland, this update might sound confusing at first, but the good news is that it doesn’t have to complicate your trip. Here’s everything you need to know about the new road tax, how it works, and how Icerental4x4 makes sure your journey stays simple, transparent, and worry-free.

Iceland New Kilometer Road Tax: Key Takeaways

• A new mandatory road tax in Iceland starts in 2026
• The tax is based on kilometers driven, not fuel purchased
• It applies to all vehicles, including rentals
• Designed to replace part of fuel-based taxation
• With Icerental4x4, the fee is handled through a clear, flat daily rate
• No per-kilometer charges, no paperwork, no surprises

What is Iceland's New Kilometer-Based Tax?

Iceland’s new kilometer-based tax is a mandatory road tax calculated according to how far a vehicle is driven. Often referred to as a kilometer fee, it replaces part of the traditional fuel tax system and applies to all vehicles using Icelandic roads, including rental cars.

The goal is simple: ensure that everyone contributes fairly to road maintenance based on actual road usage, regardless of fuel type. Instead of paying only through gas prices, drivers now pay through distance traveled.

Why is Iceland Introducing a Kilometer Fee?

As Iceland transitions toward more fuel-efficient and electric vehicles, fuel tax revenues are decreasing. However, road maintenance costs remain the same or even increase due to growing tourism.

The kilometer fee ensures:

• Fair contribution from all vehicles
• Sustainable funding for road infrastructure
• Equal treatment of gasoline, hybrid, and electric cars

In short, it modernizes the system to match how people drive today.

How the New Tax Impacts Car Rentals in Iceland?

For travelers, the biggest concern is usually cost. While the tax changes how road use is charged, it may also lead to a cheaper gas price in Iceland as fuel taxes are reduced. 

What really matters, though, is how rental companies pass this tax on to customers. Some may charge per kilometer, which can add uncertainty to your final bill, especially on long road trips.

How Icerental4x4 Handles the New Kilometer Road Tax?

At Icerental4x4, we believe that traveling in Iceland is about freedom and not counting kilometers. That’s why the new kilometer road tax is handled seamlessly for you.

Instead of charging per kilometer, we apply a fixed daily fee of 1,550 ISK per day. This means:

• No tracking kilometers
• No limits on how far you drive
• No unexpected costs after your trip

Our pricing philosophy remains the same: a clear and flat daily rate, so you can explore Iceland without restrictions or worries.

No Surprises

The kilometer road tax is included as a fixed daily fee. 

Fair-Pricing

Whether you drive a little or a lot, the cost remains fair and predictable. Perfect for long road trips and spontaneous detours.

Transparency

Everything is clearly explained upfront during booking. No fine print, no confusion.

Unlimited Mileage

Drive as much as you want. From short city trips to full island adventures, your mileage is never limited.

What Does it Mean For Your Road Trip in Iceland?

For most travelers, it means very few changes, especially if you choose the right rental company. You can still enjoy iconic journeys like driving Iceland’s ring road without worrying about extra kilometer charges.

With unlimited mileage and a fixed daily fee, your road trip remains as flexible and adventurous as ever.

What You Need to Do When Renting a Car?

Nothing at all.
When you rent with Icerental4x4:

• The kilometer road tax is paid at pickup
• You won’t pay anything extra after the rental, no matter how many kilometers you drive
• No paperwork, no declarations, no action required from you

We handle everything, so you can simply focus on your trip.
Ready to go? book your car rental in Iceland

Frequently Asked Question

You have questions about the new kilometer fee in Iceland and we’ve gathered the answers to the most frequently asked questions here:

Is Iceland's kilometer fee mandatory?

Yes. The kilometer fee is mandatory for all vehicles driving in Iceland and applies to everyone, not just Icerental4x4 customers.

Does the vehicle fuel type impact the amount of the fee?

The tax is based on distance driven, not fuel consumption. This ensures equal contribution from gasoline, hybrid, and electric vehicles.

Do electric vehicles need to pay the fee too?

Yes. Electric vehicles are included in the kilometer-based tax to ensure fair road maintenance funding.

How rental companies charge the new 2026 road fee?

Some rental companies charge per kilometer driven. Others, like Icerental4x4, use a fixed daily rate, making costs predictable and stress-free.

Can I be extra charged later, based on my kilometers with Icerental4x4?

No. With Icerental4x4, there are no extra charges based on mileage. 

Do I need to do anything when picking up or returning my rental car?

No. There’s no paperwork or reporting required. Just pick up your car, enjoy your trip, and return it as usual.

Final Words: New 2026 Iceland Kilometer Road Fee

The new 2026 kilometer road fee modernizes how Iceland funds its roads, but it doesn’t have to complicate your travel plans. With Icerental4x4, everything is handled for you, from transparent pricing to unlimited mileage, so you can focus on enjoying Iceland.

If you’re planning smart and traveling affordably, check out our tips on how to visit Iceland on a Budget and make sure to read our complete Iceland driving guide.

Drive freely. Explore fully. We’ll take care of the rest.