Iceland's parliament has approved a new kilometre-based road charge that will apply to all vehicles from 1 January 2026. The levy is calculated by vehicle weight and replaces existing fuel and registration approaches for road use payments.
How the new charge works
Under the new system, every vehicle on Iceland's roads pays per kilometre, with rates set by weight bands. Passenger cars and SUVs up to 3.5 tonnes will pay 6.95 ISK per kilometre. Larger vehicles, including buses, heavy trucks and trailers, will fall into a stepped schedule of 29 bands, with higher per-kilometre rates for heavier categories.
Payments will be handled monthly through online banking, using an estimated annual mileage derived from past records to calculate each instalment. Vehicle owners must provide a formal odometer reading at least once a year, while operators of heavier vehicles will have more frequent reporting obligations. Any gap between estimated and actual distance travelled will be reconciled at the next vehicle registration, resulting in either a refund or an additional charge.
What this means for drivers and fleets
Authorities estimate most motorists will see their running costs increase by 7% to 20%. Large SUV owners may pay less under the new structure, while drivers of small, highly efficient cars could face higher annual bills. Fleet operators and commercial transport businesses will need to adjust budgeting and reporting processes to accommodate the monthly payment schedule and more frequent odometer submissions for heavier vehicles.
Enforcement measures for non-compliance include fines, failed vehicle inspections and, in severe cases, licence plate seizure. The change marks a significant shift in Iceland's approach to road-user funding, aligning charges more directly with vehicle weight and distance travelled.
