Iceland is entirely south of the Arctic Circle. The Arctic Circle sits at 66°34′ N latitude; Iceland's mainland spans 63°24′ N to 66°32′ N. The northernmost point (Rifstangi, Grímsey Island excluded) is ~2 km (1.2 mi) south of the Circle.
The island of Grímsey (40 km off the north coast, 5 km², ~60 residents) straddles the Arctic Circle—its northern tip crosses 66°34′ N. A monument marks the line (which shifts ~14 m/year due to axial tilt). Mainland Iceland? Fully subarctic.
Despite its high latitude, Iceland enjoys a subpolar oceanic climate—milded by the North Atlantic Current (Gulf Stream extension). Reykjavík (64°09′ N) January avg: 0°C (32°F); July avg: 12°C (54°F). Compare: Fairbanks, Alaska (64°50′ N) January avg: –23°C (–9°F). The ocean makes all the difference.
Because it's below the Arctic Circle, Iceland experiences no true midnight sun or polar night. Summer: ~21 hrs daylight (Reykjavík), civil twilight all night. Winter: ~4 hrs daylight. Grímsey gets true midnight sun (briefly) and polar night.
Travelers expecting 24-hour summer sun or 24-hour winter darkness on mainland Iceland will be disappointed—but treated to spectacular prolonged twilights and aurora borealis (Sep–Apr) instead.