Summarise (click here)
- From 1 January 2026, Iceland introduced a kilometer-based road tax that replaced part of the traditional fuel tax.
- As a result, gas prices in Iceland are lower than before, since less road funding is built into fuel costs.
- Drivers now pay driving costs in two parts: fuel at the pump and road usage based on kilometers driven.
- The road tax is calculated according to distance driven and vehicle weight, not fuel consumption.
- Rental car customers see the road tax as a separate line item on their final invoice.
- Shorter trips may cost the same or less than before, as road charges reflect actual usage.
- Fuel costs are still paid directly at gas stations and are not included in the rental price.
- Petrol and diesel vehicles benefit most from lower pump prices.
- Hybrid and electric vehicles are also subject to the same kilometer-based road tax.
- The new system provides more transparency and fairer pricing for drivers in Iceland.
- Planning routes and choosing fuel-efficient cars helps keep total driving costs low.
- Parking fees, tolls, and attraction entrance fees remain separate and unchanged.
From 1 January 2026, Iceland introduced a new kilometer-based road tax that replaces part of the traditional fuel tax system. One noticeable result for drivers is that fuel prices at the pump are now lower than before, while road usage is charged separately based on how much you actually drive.
If you’re planning a self-drive trip or renting a car with Thrifty Car Rental Iceland, this guide explains what changed, why gas prices went down, and what you should realistically expect to pay when driving in Iceland in 2026.
Why Gas Prices Went Down in Iceland
Before 2026, a large part of Iceland’s road funding came directly from fuel taxes. With the introduction of the kilometer-based road tax, some of those fuel taxes were reduced.
This means:
- You now pay less per litre at the pump
- Road costs are separated from fuel costs
- Total driving costs are spread more fairly across all vehicles
Instead of paying higher fuel prices regardless of how far you drive, you now pay for road use based on actual kilometers driven.
Is Driving in Iceland More Expensive in 2026?
Not necessarily.
For many travelers:
- Fuel costs are lower
- Road usage is charged more transparently
- Shorter trips may cost the same or even less than before
For longer road trips, such as driving the full Ring Road, the overall cost is now more evenly distributed between fuel and road usage rather than hidden inside fuel prices.
You can check updated fuel prices here.
What Rental Car Customers Should Expect
If you rent a car in Iceland in 2026:
- Fuel prices may be lower than expected (around 30-40% lower)
- You will still pay for fuel separately at gas stations
- The road tax will appear as a separate line item on your rental invoice
- The total cost depends on how far you drive, not how much fuel you use
This is especially helpful for travelers planning shorter trips or staying close to Reykjavík, as lighter road use results in lower overall costs.
Tips to Keep Fuel Costs Low in Iceland
Even with lower gas prices, fuel remains one of the biggest travel expenses in Iceland. A few practical tips can help:
- Choose a fuel-efficient rental car
- Avoid unnecessary detours and backtracking
- Refuel in towns rather than remote areas
- Keep speed steady to reduce fuel consumption
Planning your route ahead of time can make a noticeable difference.
Petrol, Diesel, Hybrid and Electric Cars
The lower fuel prices mainly affect petrol and diesel vehicles.
Hybrid and electric cars:
- Still benefit from lower fuel taxes indirectly
- Are subject to the same kilometer-based road tax
- May offer lower day-to-day running costs depending on your itinerary
For many travelers, the best choice depends on trip length, charging access, and personal preference rather than fuel price alone.
What Has Not Changed
Even after the road tax reform:
- Fuel is not included in rental prices
- Parking fees, tolls, and entrance fees still apply separately
- Gas stations remain mostly self-service
- Credit and debit cards are widely accepted
The driving experience itself remains the same — only how costs are structured has changed.
Final Thoughts
Gas prices in Iceland in 2026 are lower than before due to the shift away from fuel-based road taxes. Instead of paying higher prices at the pump, drivers now pay road usage based on how much they actually drive.
For rental car customers, this creates a clearer, fairer, and more transparent cost structure. You pay for fuel when you refuel, and road usage is calculated separately based on distance driven.
If you’re planning a self-drive trip, you can expect fewer surprises and a better understanding of your real driving costs — whether you’re heading out on a short city break or a full Iceland road trip.