Why Iceland has a reputation for being expensive
Iceland applies a standard value added tax rate of 24 percent to most goods and services. A reduced value added tax rate of 11 percent applies to food, books and certain other items in Iceland. Most food and consumer goods in Iceland are imported, which adds transport cost to their retail price. Alcohol is sold to the public only through the state monopoly liquor stores called Vinbudin, aside from limited direct sales by breweries. The legal age to buy and drink alcohol in Iceland is 20.
How the season you travel in shapes your budget
Summer, made up of June, July and August, is the peak tourist season in Iceland. Long daylight hours and better road access make summer the busiest and most in-demand time to travel in Iceland. Winter and the shoulder months of spring and autumn are generally quieter than summer. In winter some highland roads and attractions can be closed because of weather.
The main costs to plan for and how you pay for them
Keflavik International Airport lies about 50 km from Reykjavik. The drive between Keflavik Airport and Reykjavik usually takes about 45 minutes. Credit and debit cards are accepted almost everywhere in Iceland, from Reykjavik cafes to rural petrol stations. Contactless payments and digital wallets such as Apple Pay and Google Pay are widely accepted in Iceland.
Renting a car for the ring road versus booking guided tours
Route 1, known as the ring road, circles the country and is about 1322 km long. A guided tour bundles transport, a guide and often entry into a single booking, while self-driving means arranging a rental car and fuel yourself. To weigh the two you need a number for the first, and the median listed tour price by category gives one from live listings. Use the Fuel Cost Calculator to help plan your trip.
Simple ways to keep your Iceland trip affordable
Tap water in Iceland is safe to drink, so travellers can refill a reusable bottle rather than buy bottled water. Tipping is not customary in Iceland because service charges are normally included in the bill. Non-residents can claim a value added tax refund on eligible goods bought in Iceland. Purchased goods must be taken out of Iceland within 3 months to qualify for a tax refund. Tax refunds do not apply to hotels, tours, car rental, restaurant meals or fuel. Reykjavik has public geothermal swimming pools that are an inexpensive activity popular with locals.
Comparing tours to lock in your Iceland budget
You can compare Reykjavik tours to see the current options.
