Car Rental Archives - All Things Iceland

Iceland’s New Road Tax Explained (2026): What Every Tourist Needs to Know

Jewells Chambers — Wed, 05 Aug 2026 17:06:53 +0000

Planning to rent a car in Iceland? Learn how Iceland’s new road tax works, why it was introduced, how it affects tourists, and how you can save money on your rental. I’ll also explain why not all rental car companies charge the fee the same way and share my recommendations after living in Iceland for the past 10 years.

One of the biggest reasons I recommend renting a car in Iceland is the freedom it gives you.

Some of my favorite memories have come from pulling over at an unexpected waterfall, taking a detour because someone mentioned a hidden canyon, or completely changing my plans after seeing that the weather was better in another part of the country.

Those spontaneous moments are often the highlights of an Iceland trip.

That’s why, when Iceland introduced a new road fee at the beginning of 2026, I immediately started getting questions from members of the All Things Iceland community.

People wanted to know:

What exactly is Iceland’s new road tax?
Why did Iceland introduce the road tax fee?
Does it apply to tourists?
How much will it cost?
Should I still rent a car?
How to budget for Iceland’s new road tax fee
How can you save on a rental car in Iceland?

If you’ve been wondering the same thing, you’re definitely not alone.

In this guide, I’ll explain everything you need to know about Iceland’s new road fee, including why it was introduced, how it works, how it affects tourists renting cars and camper vans, how different rental companies handle the fee, and some practical ways to save money while planning your Iceland road trip.

What Is Iceland's New Road Tax?

Although you’ll often hear people, including me, refer to it as Iceland’s new road tax, the official name is the kilometer fee, or kílómetragjald in Icelandic.

The fee officially came into effect on January 1, 2026, and it’s designed to help fund Iceland’s road infrastructure in a different way than before.

Under the standard government system, most passenger vehicles are charged 6.95 ISK per kilometer driven, although rates vary depending on the vehicle’s weight and classification.

Unlike a toll road where you stop to pay at a booth, this fee is based on the total number of kilometers a vehicle travels.

For Icelandic residents who own a vehicle, the fee is reported and paid according to government regulations.

For visitors, however, the process is much simpler because your rental company handles it for you.

That means you don’t have to register with the Icelandic government or report your mileage yourself. Instead, the rental company collects the fee as part of your rental agreement before paying it to the government.

This is where many travelers become confused because not every rental company chooses to pass that fee on in the same way.

I’ll cover that in detail a little later because understanding this difference can make budgeting your trip much easier.

Experience Tip: One thing I've noticed after helping thousands of travelers plan trips to Iceland is that most people assume every rental company calculates this fee exactly the same way. That's actually not the case, and knowing the difference before you book can save you both money and uncertainty when you're planning your budget.

Why Did Iceland Introduce the Kilometer Fee?

Moving Away from Fuel Taxes

At first glance, it’s easy to assume that Iceland simply added another fee for travelers. But the reality is a bit more nuanced.

For many years, Iceland paid for a significant portion of its road maintenance through taxes on gasoline and diesel fuel. The idea was simple: the more you drove, the more fuel you purchased, and the more you contributed toward maintaining the country’s roads.

That system worked well when nearly every vehicle relied on fossil fuels. However, Iceland has seen a rapid increase in hybrid and fully electric vehicles over the past several years. Those vehicles still use the roads every day, but they purchase much less, or no, gasoline or diesel.

As a result, the government was collecting less revenue from fuel taxes while road maintenance costs continued to grow. The kilometer fee was introduced to create a funding system that applies more consistently across different types of vehicles, regardless of how they’re powered.

As with any major policy change, it has generated plenty of discussion within Iceland. Some residents feel the reduction in fuel taxes doesn’t fully offset the new kilometer fee, while others see it as a fairer way to fund the country’s road network.

For travelers, though, the most important takeaway is understanding how the fee works and how your rental company chooses to collect it, because that’s what will ultimately affect your budget.

Does the Kilometer Fee Apply to Tourists?

Yes. Whether you’re visiting Iceland for a long Ring Road adventure, spending a week exploring the South Coast, or taking a short getaway around Reykjavík and the Golden Circle, this new fee applies to rental vehicles.

If you’re someone who loves taking scenic detours (and trust me, Iceland will tempt you to do exactly that), knowing how your rental company charges this fee can give you much more peace of mind.

How Rental Car Companies Charge Iceland's New Road Fee

Some Companies Charge by the Kilometer

This is probably the pricing model most travelers expect. Some rental companies simply pass the government’s kilometer fee directly on to you. When you pick up your vehicle, the current odometer reading is recorded.

When you return it, the rental company calculates how many kilometers you’ve driven and charges the corresponding road fee. The benefit of this approach is that you’re paying for exactly the distance you traveled.

If you only plan to drive around Reykjavík for a couple of days, this could result in a relatively small road-fee charge. The downside is that your final cost isn’t always easy to predict.

If your plans change, which they often do in Iceland, you may end up driving much farther than you originally expected. Suddenly, that carefully planned travel budget starts to look a little different.

Other Companies Charge a Flat Daily Road Fee

Some rental companies have chosen a different approach.vRather than charging based on every kilometer driven, they charge a fixed road fee for each rental day.

For example, Go Car Rental Iceland and Go Campers currently charge a mandatory road fee of €10.50 per rental day, regardless of your insurance coverage or how many kilometers you drive during your rental.

Personally, I really appreciate this pricing model. One of the first things I tell people planning an Iceland trip is to leave room for spontaneity.

Maybe you hear about a hidden hot spring from another traveler.

Maybe someone recommends an incredible canyon that wasn’t on your itinerary.

Maybe the weather forecast changes overnight, and you decide to spend the day exploring a completely different region.

Those things happen all the time here. With a flat daily fee, you’re free to make those decisions without wondering whether every extra kilometer is increasing your final bill.

Instead, you already know what the road-fee portion of your rental will cost before your trip even begins. For me, that kind of predictability is worth a lot.

Experience Tip: I've changed my itinerary countless times because of Iceland's weather. It's one of the best travel decisions you can make here. Having a predictable daily road fee means I can focus on enjoying the adventure instead of mentally calculating extra costs every time I decide to drive somewhere new.

The Ultimate Guide to Renting a Car in Iceland

If you're still deciding which rental car is right for your trip, I've created a free Ultimate Guide to Renting a Car in Iceland that goes far beyond the new kilometer fee. Inside, I cover how to choose between a 2WD and a 4x4, Iceland-specific insurance recommendations, gravel roads versus F-roads, parking rules, winter driving tips, common mistakes to avoid, and much more. I recently updated it to include Iceland's new kilometer fee, so you'll have the latest information all in one place.

Click Here

Is Renting a Car Is Still One of the Best Ways to Explore Iceland?

Absolutely. Even with this additional cost, I still believe renting a car is the best way to experience Iceland for most visitors.

One of the things I love most about living here is that Iceland constantly rewards curiosity. Some of the country’s most memorable places aren’t found on a typical itinerary. They’re discovered because you decided to stop at an overlook, follow a sign pointing toward a waterfall, or take a scenic detour after chatting with another traveler.

Having your own vehicle gives you that freedom. You’re not rushing to catch a tour bus, worrying about train schedules, or feeling like you have to leave somewhere just because everyone else is. Instead, you can experience Iceland at your own pace.

That’s something I think is incredibly valuable. Of course, the new kilometer fee does add another expense to your trip. But in the grand scheme of an Iceland vacation, I don’t think it’s a reason to avoid renting a car altogether.

Instead, it’s simply another cost to understand and plan for before you arrive.

Experience Tip: Some of my favorite days in Iceland have been the ones where I threw my original itinerary out the window because the weather was better somewhere else. That kind of flexibility is difficult to put a price on, and it's one of the biggest reasons I continue recommending rental cars over guided tours for many travelers.

Budgeting for the Iceland's New Road Tax

No matter which pricing model your rental company uses, my advice is simple: Plan for the road fee before you arrive.

Just like budgeting for fuel, parking, or accommodation, this is now another normal part of planning an Iceland road trip.

The good news is that once you’ve factored it into your budget, there really aren’t any surprises.

In fact, I think the bigger financial mistakes people make when renting a car in Iceland have nothing to do with the road fee at all.

Choosing the wrong type of vehicle.
Skipping important insurance coverage.
Driving roads that aren’t suitable for their rental.
Or underestimating Iceland’s weather.

Those are the kinds of mistakes that can cost hundreds, or even thousands, of dollars.

Compared to those, understanding the road fee is actually one of the easier parts of planning your trip.

Below is a way that you can save money on your rental car in Iceland.

How to Save Money on a Rental Car in Iceland (Even With the New Road Fee)

If you’re already planning to rent a car or camper van, there’s no reason not to take advantage of available discounts.

I’ve partnered with Go Car Rental Iceland and Go Campers because I’ve personally used both companies for years, and they’ve consistently provided excellent customer service and reliable vehicles for my adventures around Iceland.

When you book through my discount links, you’ll receive:

Go Car Rental Iceland

7% off your rental
Free 4G WiFi (simply select it under the Extras section when booking)

Go Campers

7% off your camper van rental
Free sleeping bag (select it in the Extras section)

The discounts are automatically applied when you book through my links and enter your rental dates, making them an easy way to offset part of Iceland’s new road fee while supporting All Things Iceland at no additional cost to you.

Continue Planning Your Iceland Road Trip

Understanding the new road fee is just one piece of the puzzle.

If you’re still deciding whether you need a 2WD or a 4×4, wondering which insurance is actually worth purchasing, or trying to understand Iceland’s gravel roads, F-roads, parking rules, and seasonal driving conditions, I’ve put everything together in my Ultimate Guide to Renting a Car in Iceland.

It’s completely free, regularly updated, and designed to help you avoid the most common mistakes travelers make before they even arrive in Iceland.

Frequently Asked Questions About Iceland's New Road Tax Fee

Can tourists avoid Iceland’s road fee?

No. If you’re renting a car or camper van in Iceland, the road fee is part of the cost of driving. The way it’s charged depends on your rental company, but it isn’t something visitors can opt out of.

Is it still worth renting a car in Iceland?

Absolutely. Even with the introduction of the road fee, I still believe renting a car offers the greatest flexibility and allows you to experience parts of Iceland that many tour groups never visit.

Why do some rental companies charge a flat daily fee?

Some companies have chosen to simplify the government’s kilometer fee by charging a predictable daily amount instead.

For example, Go Car Rental and Go Campers currently charge a mandatory road fee of €10.50 per rental day, regardless of how many kilometers you drive.

Is a flat daily fee better than paying per kilometer?

It depends on your travel style. If you’re planning very little driving, paying per kilometer could potentially cost less.

However, if you’re planning a Ring Road trip or simply want the freedom to take spontaneous detours without thinking about every kilometer, many travelers, including me, appreciate the predictability of a fixed daily fee.

Random Fact About Iceland

Did you know that Iceland’s famous Ring Road (Route 1) stretches approximately 1,322 kilometers (821 miles) around the entire island?

While many visitors dream of driving the complete Ring Road, some of the country’s most unforgettable experiences come from venturing beyond it. Scenic detours to places like the Snæfellsnes Peninsula, the Westfjords, the Westman Islands, or even into the remote Highlands often become the highlights of a trip. Snæfellsnes Peninsula Westfjords Westman Islands Highlands of Iceland

That’s one of the reasons I think it’s so important to understand how your rental company charges Iceland’s new road fee. If your itinerary changes—and trust me, it often does because of weather or unexpected discoveries—you’ll already know what to expect when it comes to your driving costs.

Icelandic Word of the Day

One of my favorite parts of the All Things Iceland podcast is sharing an Icelandic word or phrase at the end of each episode.

Today’s word is:

Kílómetragjald

Pronunciation: KEE-loh-meh-trah-gyald

The word is made up of two smaller Icelandic words:

Kílómetri = kilometer
Gjald = fee or charge

Put them together, and kílómetragjald literally means “kilometer fee.”

This is the official Icelandic term used to describe the country’s new distance-based road charge that came into effect in 2026.

So, if you happen to see news articles, government information, or conversations in Icelandic about the new road fee, you’ll likely come across the word kílómetragjald.

It’s a fun word to know—not just because it relates to this topic, but because it also gives you a little insight into how Icelandic words are often built by combining smaller words to create a very literal meaning.

Planning to rent a car in Iceland?

Before you book, grab my free Ultimate Guide to Renting a Car in Iceland. It includes everything you need to know about Iceland’s new kilometer fee, choosing the right rental car, insurance, F-roads, parking, winter driving, and more.

And if you’re ready to book your rental, don’t forget to use my 7% discount links for Go Car Rental Iceland (plus free 4G WiFi) or Go Campers (plus a free sleeping bag) to save money on your trip.

The post Iceland’s New Road Tax Explained (2026): What Every Tourist Needs to Know appeared first on All Things Iceland.

Two-Lane Roundabouts are Different in Iceland – Know These Rules Before You Drive Here

Jewells Chambers — Fri, 28 Mar 2025 22:00:57 +0000

I’m diving into an important yet often overlooked aspect of driving in Iceland—the unique rules of two-lane roundabouts. Even if you are from Europe, there is a good chance that Iceland does two-lane roundabouts a little different than what you expect.

How to Save Money on Your Rental Car in Iceland

Before we get into that, I want to give a shout-out to our amazing sponsors, Go Car Rental Iceland and Go Campers.

I actually use their cars and campers when I travel around Iceland, and I’ve partnered with them for over 4 years now. The main reasons? Their customer service is amazing, and they have a wide range of vehicles to choose from.

They’ve also given me a link so you can save 7% on your rental, plus get a couple of really useful extras.

With Go Car Rental, you’ll save 7% and get free 4G WiFi with your rental.

With Go Campers, you’ll save 7% and get a free sleeping bag included.

You can head to gorentals.is/allthingsiceland
for the discounts.

Once you enter your travel dates, the 7% discount is automatically applied.

For Go Car:
When you get to the extras section, select 4G WiFi. You’ll see the price stays the same, even though it has been added.

For Go Campers:
Choose a sleeping bag under the “Sleeping” section, and same thing, the total price won’t increase.

And just so you know, using my link gives me a small commission at no extra cost to you. It’s one of the ways you’re supporting All Things Iceland and the content I create. Thank you in advance for that.

Why Are Iceland’s Two-Lane Roundabouts Unique?

Roundabouts exist in many countries, but Iceland’s two-lane roundabouts come with specific rules that often catch foreign drivers off guard. If you’ve ever rented a car in Iceland or plan to, knowing these rules will save you a lot of confusion—and possibly a fender bender!

The key thing to know about Iceland’s two-lane roundabouts is that the inner lane (the one closest to the center) has the right of way. This is different from many other countries where the outer lane might have priority. Here’s how it works:

When entering a two-lane roundabout, you should choose your lane before entering.
- If you plan to take the first exit, you should be in the outer lane (right lane).
- If you plan to go straight or take any further exits, you should be in the inner lane (left lane).
Once inside the roundabout, changing lanes is not allowed. This means if you entered in the inner lane, you must continue in that lane until you exit.
If you’re in the outer lane and another driver is in the inner lane, you must yield to the inner lane driver if they need to exit. This is where most accidents happen because foreign drivers don’t expect this rule.
When exiting, use your turn signal to indicate your intention, just like you would in any other roundabout.

Two-Lane Roundabout Example in Iceland

The first image shows two cars entering a two-lane roundabout in Iceland. The orange car is in the inside lane (left) and the pink car is in the outer land (right).

Below shows the the exits that the pink car (outer lane) can take.

And here are the exits that the orange car (inner lane) can take.

This example is showing if the orange car is entering the two-lane roundabout in the inner lane on the bottom and the pink car is coming from the right in t he outerlane.

As a reminder, the pink car can either go to the first or second exit. In this example, it will be going to the second exit.

Since the pink car and the orange car are in close proximity to each other, the pink car is the one that gives the right of way, since the orange car is in the inner lane.

The pink car (outer lane) must stop and let the orange car (inner lane) exit before continuing on to its second exit.

Why These Rules Matter?

Iceland’s road system is designed to keep traffic flowing smoothly, and roundabouts play a big role in that. However, every year, rental car companies report minor accidents in roundabouts because of misunderstandings about these rules. The last thing you want is to start your Iceland adventure with an accident or a costly insurance claim!

The Savvy Traveler's Guide to Iceland

Whether it's your first time visiting Iceland or you have been several times before, this guide will help you explore Iceland like a local. From the best things to see in every region of the country to hidden gems, I have you covered.

Click Here

The Savvy Traveler’s Guide to Iceland I created The Savvy Traveler’s Guide to Iceland, a comprehensive 8-module video guide that walks you through everything you need to know before visiting. I even have a whole module dedicated to getting around Iceland, covering types of transportation, car rentals, road rules, and so much more.

Not only that, but when you get the guide, you’ll have lifetime access, bonus itineraries to make planning easier, and access to my free and private Facebook group, where I share specially curated Iceland travel posts and do a live Q&A each month!

Random Fact of the Episode

You might notice that as you venture outside of the downtown Reykjavík area, that you will see less traffic lights, occasionally roundabouts, and long stretches of road. One of the many things I enjoy about the Icelandic countryside is that traffic lights are not necessary.

Roundabouts are used, when necessary, at intersections to slow vehicles down and allow for cars to head in different directions.

Icelandic Word of the Episode

Hringtorg – roundabout

Share This with a Friend

Let's Be Social

Þakka þér kærlega fyrir að hlusta og sjáumst fljótlega.

The post Two-Lane Roundabouts are Different in Iceland – Know These Rules Before You Drive Here appeared first on All Things Iceland.

Renting A Camper Van in Iceland: 6 Important Pros & Cons

Jewells Chambers — Fri, 27 Oct 2023 19:44:09 +0000

Over the years, I have traveled extensively around Iceland in a camper van, so the pros and cons I’m sharing in this episode are from personal experience. While the list might not cover every possible pro and con, I think it will give you enough insight about the experience to help you decide if this is something you want to do.

Rent a Camper Van in Iceland & Save

If you plan to rent a camper van, I highly recommend using Go Campers. I’ve use two of their campers on long road trips. One was the Go Lite Automatic camper and the other is Go Big Automatic Camper. They have a large selection of campers available, great customer service, and competitive rates. When you use my link with Go Campers (https://www.gocampers.is/?ref=allthingsiceland) you’ll save 7% and get a free sleeping bag included.

to get the sleeping bag included, choose a sleeping bag under the “Sleeping” section, and the total price won’t increase.

Pros of Renting a Camper Van in Iceland

1. Save Money: Renting a camper van can be more cost-effective than constantly checking into hotels or guesthouses every night. By having your accommodation on wheels, you can reduce the expenses of your trip significantly.

2. Travel Flexibility: One of the greatest joys of a camper van is the freedom it offers. You’re not bound by hotel check-in/check-out times, and you can decide to stay longer in a place you love or move on if you’re ready for a change of scenery.

3. Icelandic Campsites: While this can also be a con (more on that later), many of Iceland’s campsites are situated in breathtaking locations. Waking up to a waterfall, geysers, or vast landscapes can be a once-in-a-lifetime experience. I recommend using the website tjalda.is to find campsites in Iceland.

4. Variety of Camper Vans: Whether you’re traveling solo, as a couple, or with a family, there’s a camper van to fit your needs. From basic models to luxurious ones with all amenities, the choices are plentiful.

5. So Many Places to Explore: Iceland is replete with natural wonders, from the Blue Lagoon to the colorful mountains in the Icelandic highlands. With a camper van, you have the convenience of stopping at off-the-beaten-path locations, making your trip even more memorable.

6. What Comes with a Camper Van: Most camper vans come equipped with cooking facilities, bedding, and sometimes even Wi-Fi. This means less to pack and a more comfortable journey overall. A heater, electric cooler, a sink and different amenities are available on what kind of van you choose.

Cons of Renting a Camper Van in Iceland

1. Icelandic Campsites: Here’s the flip side – not all campsites are created equal. Some might be crowded, especially during peak tourist season, and may lack essential facilities.

2. Using the Bathroom at Night: Most camper vans don’t come with a toilet. So, those midnight nature calls can be a bit challenging, especially if you’re parked far from campsite facilities or in more isolated areas.

3. Extra Camper Van Costs: While the van itself might seem like a bargain, remember to factor in the cost of fuel, campsite fees, and any additional equipment or insurance you might need.

4. Icelandic Weather: Iceland’s weather is notorious for its unpredictability. Driving a camper van in strong winds, rain, or snow can be challenging. And even if you’re not driving, being cooped up in a small space during bad weather can be less than ideal.

5. Confined Space: Even the most spacious camper vans can feel tight after a few days, especially if you’re traveling with others. It requires a certain level of adaptability and patience. Here are some packing cubes that are so useful to use for your camper van adventures.

6. When Campsites Are Open: Not all campsites are open year-round. If you’re traveling during the off-season, you might find limited options, which can pose challenges for where you can legally and safely park for the night.

Free Iceland Packing Checklist for Winter & Summer

For the full list of essentials of what to pack and wear in Iceland, grab my free Ultimate Packing Checklist.

Random Fact of the Episode

My favorite campsite in Iceland is called Heydalur in the West fjords. They have such amazing facilities, like a gorgeous pool in a greenhouse, geothermal hot springs, beautiful grounds, a hotel, a restaurant and more.

Icelandic Word of the episode

Ferðabíll or Húsbíll – camper van

The post Renting A Camper Van in Iceland: 6 Important Pros & Cons appeared first on All Things Iceland.