Holidays to Iceland under £500

Iceland has few traditional resorts, so budget stays tend to cluster in towns that offer a practical base for exploring the coast and interior.

• Reykjavik: Reykjavik is the obvious starting point for a budget Iceland trip, because the compact centre lets you reach restaurants, museums and the harbour on foot without paying for taxis. Hotel and guesthouse stock is the largest in the country, which gives more choice at lower price points than anywhere else. The trade-off is that central rooms can still be expensive in summer, so we would suggest travelling outside peak weeks. For a first visit, it remains the most reliable base for keeping the total down. Reykjavik holidays
• Akureyri: Akureyri is the largest town in the north, set on a long fjord about a few hours by road from the capital, and it offers a quieter and often more affordable base. Accommodation is generally less crowded than in the south, which can help keep nightly costs in check. The trade-off is the longer journey from Keflavik, which adds time and sometimes fuel cost if you hire a car. We think it suits travellers who value calm evenings and access to whale watching, the same brief our Iceland Adults Only Holidays deals are built around.
• Husavik: Husavik is a small harbour town on the north coast, known across the region for whale watching tours that leave directly from its quay. Guesthouse rooms here are modest in number, so booking early in summer is wise to avoid paying more for the last available beds. The trade-off is limited nightlife and fewer restaurants than in the capital, which many people find restful. For a budget trip built around wildlife and a slower pace, it is an excellent choice, the same brief our Iceland Family Holidays deals are built around.
• Vik: Vik is a village on the south coast of the Ring Road, a long drive from the capital, and it works well as an overnight stop on a self-guided route. Its black sand beach and basalt sea stacks are free to visit, which keeps daily spending low once you are there, the same kind of value our Iceland Beach Holidays deals are built around. The trade-off is that the village is small and accommodation fills quickly in summer, so early booking matters. We recommend it for travellers who want scenery without a city price tag.
• Stykkisholmur: Stykkisholmur is a small town on the Snaefellsnes Peninsula, where a harbour serves as a ferry port for boat trips out across the wide western waters. Accommodation here is simple and generally priced below the capital, which helps a tight budget stretch further. The trade-off is that the town is remote, so you will need a car or a planned transfer to get around comfortably. For a quiet, low-cost base in west Iceland, it offers good value.