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Payroll calculator for contractors

Enter an invoice total and see what ends up as net salary, or start from the salary you want and see what you need to invoice. The calculator runs the same calculation Fustle uses for Payroll.

Updated
Sources reviewed
Tax year
2026

An 800,000 ISK invoice excluding VAT becomes roughly 500,000 ISK in net salary (506,147 ISK on the fixed plan, 499,174 ISK on the flexible plan) in 2026 with the full personal tax credit, because the employer (you) pays an 11.5% pension contribution and 6.35% social security on the salary before the 4% employee pension and withholding tax are deducted. The calculator shows the exact figure for your amount and itemises every line.

Key figures

Tax brackets 2026
31.49% / 37.99% / 46.29%
withholding incl. average municipal tax
Personal tax credit
72,492 ISK per month
869,898 ISK per year
Pension
4% + 11.5% employer
mandatory 15.5% total
Social security
6.35%
on salary and employer pension
Flexible Payroll
4%, max 13,900 ISK/month + VAT
deducted from the payment
Fixed Payroll
10,900 ISK/month + VAT
billed separately
What do you want to calculate?
ISK
Payroll plan

Net salary

499,174 ISK

per month

62.4% of the invoice total ends up as net salary

Show the breakdown
Invoice excluding VAT
800,000 ISK
Fustle service fee (4%, max 13,900 ISK)
− 13,900 ISK
VAT on the service feeinput VAT, not deducted from salary
3,336 ISK
Payroll base
786,100 ISK
Employer pension contribution (11.5%)
− 76,172 ISK
Social security (tryggingagjald) (6.35%)
− 46,896 ISK
Rehabilitation fund (0.1%)
− 662 ISK
Gross salary
662,368 ISK
Employee pension contribution (4%)
− 26,495 ISK
Taxable income
635,873 ISK
Withholding tax before credit
209,191 ISK
Personal tax credit
+ 72,492 ISK
Withholding tax
− 136,699 ISK
Net salary
499,174 ISK
More assumptions

Personal tax credit used with Fustle

Choose 0% if another employer already uses your credit.

Fills the lower brackets first, so the Fustle salary lands higher.

Additional pension savings

Your contribution. The employer match is 2% when you choose 2% or 4%.

I am VAT-registered

VAT on the Fustle fee is then input VAT and does not reduce the salary.

Start with Payroll

An estimate for one month using the 2026 tax-year parameters: tax brackets, personal tax credit, 4% + 11.5% pension and 6.35% social security. The calculator runs the same calculation Fustle uses for Payroll but does not consider calculated remuneration, union fees or other deductions. The VAT you add to the invoice is not part of the salary.

Example net salaries 2026

One month, full personal tax credit, no other salary, 4% mandatory pension and a VAT-registered user. Invoice totals exclude VAT.

Invoice excl. VATNet salary — flexibleNet salary — fixedShare (fixed)
300,000 ISK232,094 ISK238,745 ISK79.6%
500,000 ISK341,876 ISK349,579 ISK69.9%
800,000 ISK499,174 ISK506,147 ISK63.3%
1,200,000 ISK699,813 ISK706,785 ISK58.9%
2,000,000 ISK1,083,817 ISK1,089,857 ISK54.5%

The fixed subscription costs 10,900 ISK + VAT per month and is billed separately. The flexible fee is deducted from the payment before salary is calculated.

How the calculator works

The invoice you send a customer is not your salary. As a contractor you are both employer and employee, so part of the amount goes to payroll costs before anything can be called salary. The calculator follows that path in four steps:

  1. Invoice excluding VAT is the starting point. The VAT you add to the invoice is not your income; it is tax you collect and pass on.
  2. The service fee is deducted on the flexible Payroll plan (4% of payments received, capped at 13,900 ISK per month + VAT). On the fixed plan (10,900 ISK per month + VAT) the fee is billed separately and does not reduce the payroll base.
  3. The payroll base splits into salary and the employer's payroll costs: an 11.5% pension contribution, 6.35% social security on salary plus that contribution, and 0.1% to the rehabilitation fund. Salary = payroll base / 1.1868 when no additional pension is selected.
  4. From the salary, the 4% employee pension contribution is deducted. Withholding tax is calculated on the remainder in three brackets (31.49% / 37.99% / 46.29%) and the personal tax credit of 72,492 ISK per month is subtracted from the tax.

The result is net salary. In the other direction, the calculator searches for the lowest invoice total that produces the salary you entered.

What is included and what is not

The calculator uses the 2026 tax-year parameters and the same rule Fustle's Payroll uses for one salary month. It does not consider calculated remuneration (the minimum Skatturinn expects you to pay yourself), union fees, mileage allowances, per diems or deductible business expenses. Those appear in your books and tax return and can lower your tax.

Under More assumptions you can set how much of the personal tax credit you use with Fustle, add salary from another employer in the same month, choose additional pension savings and indicate whether you are VAT-registered.

Why the share rises with the amount

The personal tax credit is a fixed amount in ISK. At low income it removes most of the tax and the net share is high. Once taxable income passes 498,122 ISK per month every extra króna is taxed at 37.99%, and above 1,398,450 ISK at 46.29%, so the share falls. Payroll costs are always the same percentage.

What happens next

In Payroll you record invoices and payments, Fustle calculates the salary with these same rules and prepares the filings you follow up on. See Payroll or read about tax brackets, the personal tax credit and social security before you choose.

Frequently asked questions

Why is the net salary so much lower than the invoice?

Because the invoice has to cover both the salary and the employer payroll costs. As a contractor you pay the 11.5% employer pension contribution and 6.35% social security yourself; an employee never sees those on a payslip. Then the 4% pension contribution and withholding tax come off the salary as for anyone else.

Is VAT included in the invoice amount?

No. Enter the amount excluding VAT. The VAT you add to the invoice (24% or 11%) is tax you collect for the state and report on your VAT return; it is not part of your salary.

Is this the exact figure Fustle pays out?

The calculator uses the same rule and the same parameters Fustle Payroll uses for one month. Actual pay can differ if you use the personal tax credit differently, belong to a union, have unused credit carried from earlier months, or record expenses that are reimbursed with the salary.

What about calculated remuneration?

Skatturinn expects the self-employed to pay themselves at least the salary for their reference category, regardless of what came in during the month. The calculator uses the payments you enter. If they fall below the reference amount, read about calculated remuneration.

Can I use it for a private limited company (ehf.)?

The salary rule for an owner paid by an ehf. is the same, but the company pays the payroll costs and profit and dividends are taxed on top. The calculator assumes a sole trader.

Sources

General information, not advice on your situation. Skatturinn and other authorities assess each case. Check the review date and sources before relying on a figure.

Where does Fustle fit in?

Record the work and create the invoice. The service you choose determines the support included.

Explore Invoicing →