Personal Tax Credit in Iceland (2025)
TL;DR
Personal tax credit reduces monthly income tax by 68,691 ISK per month / 824,292 ISK per year. You can split it between jobs; FreelancePay applies it automatically.
How the Personal Tax Credit Works
- Every resident receives a monthly credit that reduces tax owed.
- Applied against income tax only (not pension or social fees).
- You can split the credit if you have multiple jobs.
- More information – Skatturinn
2025 Personal Tax Credit Value
Monthly: ISK 68,691 • Yearly: ISK 824,292
Common Mistakes
Forgetting to apply credit on secondary income
Double taxation
Using more than 100 % across jobs
Tax office adjustment + bill
Not informing contractor service of split
Over‑withholding of tax
FreelancePay Applies It Automatically
Your credit is applied each month based on your income and other employment you report. No manual adjustments.