FreelancePay

Income Tax Brackets in Iceland (2025)

TL;DR

Iceland uses three tax brackets: 31.49 %, 37.99 %, and 46.29 %. Your total monthly income decides the rate. Tax is reported monthly and late returns cost 1 % per day + interest.

2025 Rates and Thresholds

Bracket 1

31.49 %

Monthly income: 0 – 472 005 ISK

Bracket 2

37.99 %

Monthly income: 472 006 – 1 325 127 ISK

Bracket 3

46.29 %

Monthly income: 1 325 128 + ISK

How to Calculate Your Tax

  1. Sum all your income (salary + freelance).
  2. Apply the rate for the portion within each bracket.
  3. Subtract your personal tax credit.

Example for 900 000 ISK/month:

  • 472 005 × 31.49 % = 148 501 ISK
  • 427 995 × 37.99 % = 162 626 ISK
  • Total ≈ 311 127 ISK before credit.

Official Tax Rates – Skatturinn

Tax brackets illustration

Filing Frequency and Penalties

Monthly returns. Late filing = 1 % daily penalty for 10 days + interest.

FreelancePay Makes It Simple

We apply correct bracket, calculate pension and social fees, file monthly returns and ensure on-time payments.

Try our income calculator →Learn about personal tax credit →