How to Plan a trip to Iceland: Everything you Need to Know!

Everything you need to know to plan a trip to Iceland, the land of fire and ice!

If you want to plan a trip to Iceland you may also be interested in Driving the Iceland Ring Road.

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Plan a trip to Iceland

What kind of people would inhabit such a bleak and unforgiving landscape? Happily, some of the most fascinating and progressive people I’ve encountered in my travels so far. Icelanders enjoy one of the highest standards living, with one of the longest life expectancies and among the highest levels of literacy in the world. Studies suggest they are one the happiest people in the world and it is rumoured that the prime ministers’ phone number is listed in the phone book. A poll revealed that 80% of Icelanders believe in elves, and cherish their history of legend and folk lore.

Iceland Tourist Taxes

Iceland now has two separate taxes that travellers need to budget for, and it’s worth understanding both before you go. The first is the accommodation tax (gistináttaskattur), which was reinstated in January 2024 and increased again from January 2025. The current rates charged per room per night are 800 ISK (approximately USD $5.80) for hotels and guesthouses, and 400 ISK (approximately USD $2.90) for campsites and motorhome pitches (in 2026). The tax is charged per room rather than per person, so a couple sharing a hotel room pays the same as a solo traveller. It is typically added to your accommodation bill automatically, either included in the booking price or charged separately at checkout, depending on the provider, so it’s worth checking when you book.

The second tax is the new kilometre-based road usage tax introduced in January 2026, which is outlined in the car hire section below. The new tourist taxes are genuinely well-intentioned and the revenue goes towards maintaining and protecting the extraordinary natural environment to ensure they can continue to be enjoyed in the future.

Plan a trip to Iceland to Drive the ring road

There are plenty of quality tours on offer, but the best way to see Iceland is to hire a car and take a world-class road trip.

Route 1 or ‘the Ring Road’ covers 1339 km of sealed and gravel roads. 10 days is ample time to take the journey and make stops along the way.

We spent thirteen days in Iceland (including days spent flying from the UK) to drive the Ring Road with a couple of days in Reykjavík. To ensure you have time to enjoy your visit, aim for two nights each in the West, North, East, Southeast and Southwest regions.

Plan a trip to Iceland: When to Go

Peak season

Mid-June to August is the most popular time to plan a trip to Iceland, due to the long days (midnight sun) allowing more time to explore the great outdoors. Driving is also easier for visitors not used to icy conditions and camping is more comfortable. Milder weather also reduces the risk of roads being blocked in the highlands.

Shoulder season

May and September is the off-season/ shoulder season. Travel expenses are cheaper and popular sites are less crowded.

Car hire is typically the biggest expense for those who plan a trip to Iceland and many car hire companies drop their fees by almost a third on the first of September.

Plan a trip to Iceland in September

September is my preferred time to visit because the sun sets around 7.30-8pm which gives you plenty of time to explore, without risking night driving. Prices drop in the shoulder season and the night-time darkness offers the opportunity to see the Aurora Borealis. Whilst this is more common from October onwards, I was lucky enough to see the northern lights two nights in a row during late September.

Climate- September

There’s a saying ‘Iceland is green and Greenland is Icy’. Technically the weather isn’t as cold as you’d expect, thanks to the Gulf Stream, but Iceland is windy and wet. For the majority of our trip (late September) the temperature hovered between 5-7 degrees Celsius during the day. Most days I wore trousers, woollen socks, hiking boots, gloves, beanie, long sleeve Icebreaker base layer with a North Face down vest or my locally made Lopapeysa. I took my rain jacket with me everywhere, because the weather is erratic and there’s always a chance you’ll get caught in a shower

Plan a trip to Iceland: Cost

Iceland can be expensive, but there are a few ways to cut costs when you plan a trip to Iceland:

• Camp if weather permits
• Book sleeping bag accommodation (many guesthouses offer a discount if you BYO sleeping bag & save the hosts from washing your linens)
• Self cater (many guesthouses have a kitchen/ shared kitchen facilities)
• Bring your allocated 3kg food per person with you (see ‘food’)
• Enjoy the large variety of sites that don’t have an entrance fee
• Hire a car rather than taking tours if travelling in a group
• Be smart about car hire. Prices vary considerably from a Toyota Yaris to a 4WD. However, you probably only need a four-wheel drive if you are planning to explore the highlands and driving on f roads. A smaller car or a diesel, is cheaper to rent and more economical to run.

Plan a trip to Iceland: Car hire & fuel costs

Iceland is not a budget destination, and car hire will likely be one of your biggest trip expenses. In 2026, a standard economy car for a two week hire will set you back roughly USD $40-70 per day in low season (October to March) and USD $70-100+ per day during peak summer (June to August). If you’re planning to venture off the ring road onto F-roads (Iceland’s highland gravel tracks) you’ll need a 4WD, which pushes costs to USD $150–300 per day including insurance. For a straight ring road trip in summer, a standard 2WD is perfectly fine and will save you considerably.

Travellers should be aware that on January 1st 2026, the Icelandic government introduced a new kilometre-based road usage tax (kílómetragjald). This basically means that instead of adding road taxes on top of fuel prices, Iceland now charges a flat fee per kilometre driven -currently around 6.95 ISK per kilometre (approximately USD $0.05/km). Most rental companies either charge this as a daily fee of around USD $10–14 per day or calculate it from the odometer on return. The good news is that the government simultaneously removed fuel taxes from petrol prices, so fuel is now noticeably cheaper. For the full 1,332km ring road, the new road tax works out to roughly USD $70 total, which for most tourists is more than offset by the fuel savings. For a two week trip covering the ring road plus day trips and detours, budget approximately USD $150–200 total for fuel based on current pump prices (2026).

Estimated budget for car hire and car expenses:

• Economy car hire (14 days, peak season): USD $980–1,400
• Fuel (approx 2,000km total including detours): USD $180–230
• Road usage tax: USD $155–195
• Vaðlaheiðargöng tunnel toll (North Iceland): USD $12 once
• Total estimated driving costs: USD $1,325–1,800 for two weeks

Please note, these are estimates only. Prices vary significantly between hire companies, and booking well in advance almost always secures a better rate. I’d recommend comparing prices across Northbound, Blue Car Rental and Hertz Iceland before booking.

Public transport is almost non-existent in Iceland so if you plan on seeing the sites outside of Reykjavík, car hire is the best (and only) choice for independent travel. If you’re travelling in a group splitting the cost of car hire may be cheaper than a tour, with the added bonus of tailoring the journey to your own interests and schedule. Travel in the off-season (Sept- May) and you may reduce your car hire expenses by a third. Overall our experience was positive with the exception of a flat tyre, resulting from a leak in a previous repair.

The extreme weather conditions are tough on cars and foreigners don’t always have the necessary skills for driving in Iceland. Consequently, car hire companies take measures to protect themselves from damage and that leads to tourists receiving unexpected fines. To avoid fines and additional fees:

• Take photo’s of your hire car at the beginning and end of your trip to avoid being charged for pre-existing damage
• Inspect your car at pick up and highlight marks and damage on the rental car document. Request that staff initial the identified damage. Pay particular attention to the windscreen & car hinges
• The strong wind in Iceland has been known to rip off car doors or damage car door hinges. Be extremely careful getting in and out of the car and don’t leave the car doors open
• Insurance: take out all extra insurance, especially gravel, sand and ash, as many long stretches of the Ring Road are unsealed. Storms and ash clouds can damage car paint and are a common in some parts of Iceland. Theft on the other hand is quite rare.
• Read the fine print: know what your insurance policy covers, and what it doesn’t
• Choose a company that offers unlimited mileage
• There are free car washes around Iceland at many fuel stations. Give your car a good wash before returning it to avoid cleaning fees
• Return your car with a full fuel tank to avoid added fuel charges on your credit card

Suspicious fees

Online travel forums are full of stories of unsuspecting travellers getting surprise bills from Icelandic car rental companies months after their trip. To protect yourself from this situation pay for your car hire with a credit card. Then if the fee seems suspicious, the credit card company can cancel the payment as an ‘unauthorised charge’. Fines for speeding or travelling on particular roads (such as ‘f’ roads) may attract fines, which will find you sooner or later. So when you plan a trip to Iceland, know your policy and follow the road rules

Tips for Driving in Iceland

• Hire a GPS when renting your car & buy a road map. You will need both
• Bring a valid drivers licence and/ or international drivers licence
• Icelanders drive on the right side of the road/ overtake on the left
• In cities the speed limit is 30-50 km/hr; 80km/hr on gravel roads; 90km/hr on paved roads
• Turn car headlights on for both day and night driving
• It is illegal to drive under the influence of alcohol or drugs. The blood alcohol limit for driving is 0.00
• Always wear a seatbelt
• Highland driving and travelling on ‘f roads‘ is strictly for 4WD
• All off-road driving is illegal. The landscape is delicate and damage caused to the vegetation can last for decades
• When approaching a single lane bridge, the first car to reach the bridge has right of way
• Regularly check updates for road conditions and weather
• The majority of the ring road is a single carriageway with no shoulder. Wait until there is a safe place to park before stopping to admire the view.
• Slow down on gravel roads to avoid damage to other vehicles
• Animals on the road have right of way

Supermarkets

Many guesthouses have self cater / shared kitchens so you can make your own evening meals. Bonus and Kronan supermarkets are reasonably priced and are in most villages. In a pinch, basic supplies can be purchased at fuel stations.

Dining Out

There are many budget-friendly dining options. Reykjavík has a number of Thai restaurants and Pizzeria’s are in most villages. Fuel station hot dogs are perfect for a meal on the road, and for dessert? You can’t go past Skyr, an Icelandic dairy product, which eats like yoghurt but which is actually a variant of cream cheese.

When your budget allows, try some of the local cuisine: lamb soup, seafood stew, reindeer burgers… but give the fermented shark a wide berth…

Plan a trip to Iceland: What to Pack

• Food (see above)
• A few scoops of laundry detergent in a zip lock bag for hand-washing
• Cooler bag for picnics on the road
• Water bottle- glacier water is available free on tap
• Thermos mug for BYO coffee on the road
• Music & podcasts
• Drivers licence &/or international drivers licence
• Camera/ smart phone
• Book- most cabins we stayed at didn’t have a TV or any entertainment

To find out more about my favourite travel gear: Travel Gear for Multi Day Hikes.

Clothing

• 3 merino base layer shirts, (2 long sleeve, one short sleeve)
• 3 pairs of trousers/ hiking trousers
• Down vest /down Jacket
• Fleece/ woollen jumper/ Lopapeysa (see below)
• Merino/ woollen socks x3
• Rain shell (don’t bother with umbrellas, the wind destroys them)
• Hiking boots 
• Gloves, beanie, scarf
• A nice outfit for Reykjavík
• Bathers & quick dry towel (thermal pools)
• Sunglasses & sunscreen
• Small backpack for day trips

If you plan a trip to Iceland in winter, or will be doing a lot of hiking you may also consider taking thermal underwear, merino socks, gaiters and hiking poles. Take woollen clothing wherever possible.

Lopapeysa

Lopapeysa is a woollen jumper knitted with undyed lopi wool in white, grey, black or brown, and with a distinctive ‘yoke’ at the neckline. Lopapeysa can be itchy to begin with, but softens with wear. The Lopapeysa has only been around since about the 50’s and it’s unclear what inspired the design, despite its short heritage. However, it has recently experienced a resurgence and is popular among farmers and urban Reykjavík hipsters alike. Prepare to fall for its understated cool.

When you plan a trip to Iceland, allow enough space in your pack for a Lopapeysa. The wool of Icelandic sheep known as ‘lopi’ is unique in that it has both wind hairs and fleece. The unspun wool has better insulating properties than traditional wool. The inner fibres provide warmth whilst the long outer fibres keep the garment water-resistant. These distinctive qualities mean that Lopapeysa are light and will keep you warm, even when wet.

Pick one up on your first day in Reykjavík so that you can make full use of it in the Icelandic climate. I still wear mine although I don’t get as many opportunities as I’d like in Australia. But it’s now 10 years old and still looks as good as the day I bought it and is one of my favourite travel souvenirs. Read on to find out the best places to buy a Lopapeysa.

I recommend purchasing your jumper from either Álafoss or the Handknitting Association of Iceland. They have the best variety and only stock garments hand-made by Icelanders. Both stores provide Value Added Tax receipts to claim back VAT when you leave Iceland (see VAT below).

Second-hand Lopapeysa

Alternatively many charity shops stock second-hand Lopapeysa for a fraction of the cost and are retro-chic. Vendors at the Kolaportið flea market (open weekends) by the harbour also sell Lopapeysa slightly cheaper than the stores.

Happy Trails!

 Need more help to plan your trip to Iceland? Iceland Itinerary and Iceland with children.