What are the different tax brackets in Iceland?

What are the different tax brackets in Iceland?

In Iceland, for the 2025 tax year, individual income is subject to a progressive tax system with three distinct tax brackets, which combine national and municipal taxes. These are:

• First bracket: Income up to ISK 472,005 per month is taxed at a rate of 31.49%.
• Second bracket: Income between ISK 472,005 and ISK 1,325,127 per month is taxed at 37.99%. This rate only applies to the portion of income that falls within this threshold, not the entire income.
• Third bracket: Any income exceeding ISK 1,325,127 per month is taxed at the highest rate of 46.29%. This rate only applies to the portion of income that falls above this threshold, not the entire income.

If you have another job, it is important that you notify us and let us know in what tax bracket your contractor income needs to be calculated in. You can do so by adding this information to the 'other' section of your account. This helps us pay the correct amount of tax for you and lessen the likelihood of getting a fine from the tax office.

More information can be found on the tax office website: skatturinn.is