What Is Zakat?
Zakat is one of the Five Pillars of Islam — a mandatory annual charitable payment on qualifying wealth above a minimum threshold. It is not a voluntary donation; it is a religious obligation for every Muslim who meets the criteria. The word zakat comes from the Arabic for "purification" — the idea being that giving zakat purifies the remainder of your wealth and fulfils your duty to those less fortunate.
Who Must Pay Zakat?
Zakat is obligatory on every Muslim who:
- Is an adult (post-puberty)
- Is of sound mind
- Possesses wealth above the nisab (minimum threshold)
- Has held that wealth for a full lunar year (hawl)
Understanding the Nisab
The nisab is the minimum amount of wealth a Muslim must possess before zakat becomes obligatory. It is based on the value of either:
- Gold: 87.48 grams of gold, or
- Silver: 612.36 grams of silver
Because silver and gold have different values, the nisab threshold will differ depending on which you use. Many contemporary scholars recommend using the silver nisab as it includes more people within the obligation and benefits more recipients. Always check the current nisab value with a reliable zakat calculator or your local Islamic authority, as it fluctuates with precious metal prices.
The Zakat Rate
The standard rate for most forms of wealth is 2.5% of the total zakatable assets held for one lunar year. (Agricultural produce and certain other assets have different rates, but 2.5% applies to the most common personal wealth categories.)
What Assets Are Zakatable?
Cash and Savings
All cash held in bank accounts — current, savings, or otherwise — is zakatable if it has been held above the nisab for a full year.
Gold and Silver
Physical gold and silver jewellery and bullion are zakatable. Most scholars include all gold jewellery; a minority exempts jewellery used regularly for personal adornment up to a reasonable amount.
Investments and Shares
Shares in companies are zakatable. The calculation method varies: some scholars apply 2.5% to the current market value; others apply it only to the zakatable underlying assets of the company. Islamic funds often publish a "zakat per unit" figure to assist investors.
Business Stock and Receivables
If you run a business, stock held for sale and outstanding receivables you expect to collect are zakatable at 2.5%.
Pension Funds
Opinions differ on pension funds. Many scholars say zakat is due on accessible pension funds but may be deferred on locked-in occupational pensions until funds are accessible.
A Simple Calculation Example
- Add up all zakatable assets: savings + investments + gold value + business stock
- Subtract any immediate liabilities (debts due within the year)
- Check the result exceeds the nisab
- Multiply the net figure by 2.5%
Example: £20,000 savings + £5,000 investments + £3,000 gold − £2,000 debt = £26,000 zakatable wealth. Zakat = £26,000 × 2.5% = £650.
Who Receives Zakat?
The Quran specifies eight categories of eligible recipients, including the poor, the destitute, those in debt, and travellers in need. In practice, most Muslims give through reputable zakat-collecting organisations that distribute funds appropriately.
Zakat vs. Sadaqah
Zakat is obligatory; sadaqah is voluntary charity. Once you have fulfilled your zakat obligation, giving additional sadaqah — in any amount, at any time — is highly encouraged and carries its own spiritual reward. Both play a vital role in Islamic wealth management.