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

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