The best time to visit Iceland is subjective, depending on what you want to experience. For a good balance of activities, though, visit in March. After the dark days of winter, March sees daylight lengthen as spring begins, so you can spend more time outdoors exploring the country’s volcanic landscapes.
That said, there’s still a touch of winter in the air — you can continue to do activities like ice caving, and it’s possible to see the northern lights later in the evenings if skies are clear. Whenever you visit Iceland, rain is a possibility, but as long as you bring the right clothing it shouldn’t impact your experience.