Self-Employed Taxes in Iceland (2026)

Iceland uses three progressive income tax brackets in 2026:

• 31.49% on monthly income up to 498,122 ISK
• 37.99% from 498,123 to 1,398,450 ISK
• 46.29% on income above 1,398,450 ISK

These rates apply to your calculated remuneration (reiknað endurgjald) and any additional income. Municipal tax (útsvar) is included in these figures.

Every taxpayer receives a personal tax credit that reduces tax owed. In 2026 the monthly credit is 72,492 ISK (869,904 ISK/year).

Unused credit can be transferred to a spouse. Fustle applies your personal tax credit automatically each month, ensuring you never overpay.

Beyond income tax, contractors pay:

• Tryggingagjald (social security): 6.35% of calculated remuneration
• Pension (lífeyrissjóður): 15.5% total (4% employee + 11.5% employer)

These are calculated on your reiknað endurgjald, not just cash received. Fustle handles both payments monthly.

Tax reports (staðgreiðsluskil) are due by the 15th of each month for the previous month. Late filing incurs penalties from Skatturinn.

Fustle submits your reports automatically before the deadline. You receive a notification and can review the breakdown in your dashboard.

In addition to monthly reports, you file an annual tax return (skattframtal) declaring all income and deductible expenses for the year. Deadline is typically end of March for the previous year.

Fustle pre-fills your return with data from monthly filings. Claim business expense deductions to reduce your final tax bill.