Your Zakat year should begin on the date your wealth equals or surpasses the Nisab. If your wealth equals or surpasses the Nisab after one lunar year has passed (also known as Hawl), then Zakat will be payable. In this instance, you will use this date again for the following year.

If your wealth did not equal the Nisab after one year, then you will not have to pay Zakat. Furthermore, you will wait to see when your wealth equals or surpasses Nisab.

Your Zakat due date

The moment your wealth equals or surpasses Nisab, that will initiate a new year for Zakat. You will then see a year after this new date whether your wealth equals to or surpasses the Nisab. This is referred to as your ‘Zakat due date’ or ‘Zakat anniversary’ on this website.

Zakat is due immediately upon your Zakat anniversary. If you’re not sure when this is or you’re paying for the first time, simply work out the day you first owned wealth over and above the Nisab threshold (if you don’t know the exact date you can estimate). Once you’ve paid your Zakat once this then becomes your Zakat anniversary.

Zakat can be pre-paid before your Zakat anniversary. This is to encourage people to increase in worship and make the most of blessed times like Ramadan or the first ten days of Dhul Hijjah. If you do pay early, you still need to work out your Zakat due on your Zakat anniversary to make sure you’ve paid the right amount.

Do I have to pay Zakat in Ramadan?

Paying Zakat in Ramadan is not necessary, although giving charity in this month guarantees greater rewards.

And Allah knows best. 

The majority of scholars hold the opinion that Zakat is to be both paid and received by Muslims. Other forms of charity such as Sadaqah can be given to Muslims and/or non-Muslims alike.

Zakat cannot be given to:

• The rich (except when such are among the workers of Zakat).
• The strong and able poor e.g. those capable but not willing to work
• The heretic, apostate, those disbelievers actively fighting Islam
• The family of the Prophet (peace be upon him) – The names of the Prophet’s tribes are Banū Hāshim and Banū Muṭṭalib.
• Lineal descendants i.e. children and grandchildren
• Lineal ascendants i.e. parents and grandparents
• Wives of the payer

Note, the Hanafi school does not permit a wife to give Zakat to her husband. However the Shafi’i school permit the wife to give her Zakat to her needy husband.

The Property and other fixed assets category does not include the home you live in but includes property purchased with the intention to make profit from reselling. In addition, the value of leased property is not subject to Zakat. Only the rental income is subject to Zakat.

Is Zakat due on the house I live in?

• There is no Zakat due on the house that a person owns and lives in or in the house that he or she owns but their dependents (wives / children etc.) live in.
• There may, however, be Zakat applicable on any other property or building that a person owns.

Typical Scenarios:

• Living in the property – No Zakat due.
• Using the property for business and trade – No Zakat is due on the property itself however there is Zakat due on business goods and profits from the business
• Rental income: whatever is left over from your rental income on your Zakat date after any expenses, maintenance, mortgage and so on will join the rest of your cash balance and will be Zakatable at 2.5%.
  It is important to note that any rental income from properties owned should be added to one’s cash balance for Zakat purposes.

Mortgages

Mortgage payments are not deducted from your Zakatable assets. Scholars give an allowance for up to one year’s worth of the non-interest portion of the payments to be deducted but this allowance should only be taken if one feels that not doing so significantly impacts one ability to make the repayments in a timely fashion. If it is an Islamic home purchase plan then these are not considered to be debt and therefore nothing is deductible.

To Summarise

• The house in which you live is not subject to Zakat
• If a property or other fixed asset has been purchased with the express intent to resell, then the entire value of the property / asset is subject to Zakat
• If there is any other intention, then it is not subject to Zakat
• For example, you purchase an additional property other than the residential house & the intention for purchasing it is just to invest cash in it. In this scenario, the second house is not to live in, so there is no zakat due on it because it is a long-term investment.
• However, if you make an intention to sell your property, it will not be subject to Zakat. Upon the sale, any remaining proceeds on your annual Zakat day will be liable for Zakat.
  Fixed assets
• Like property, Zakat is due based on the use of the fixed asset and your intention. For fixed assets such as land, Zakat is not due on the land if you have simply inherited or purchased it with no particular intention or as a store of wealth.
• If it was bought for investment, then Zakat is due on the approximate sale price of the land every year, on the Zakat anniversary. This means that the land needs to be valued each year to see if it’s value has increased, depreciated or remains the same. It’s always important to check to ensure that you do not over – or underpay. You can delay the payment for each year for the time when the land is actually sold. In this case it will be due for each of the previous years based on the land value at the time.

Common Questions:

If we have additional property other than the residential house and if the property is purchased just to invest cash in it, is the house a Zakatable asset?

If you have a second house which is neither to live in, nor for renting out then there is no Zakat due on it while it remains a long-term investment.

If you intend to sell it afterwards, only upon selling it will the proceeds be Zakatable. The proceeds will be added to your Zakatable assets. The value of the house which was initially bought as a long-term investment will not be subject to Zakat.

Of course if you do manage to sell it then Zakat may well become due on the cash proceeds that you are in possession of on your Zakat payment date.

I own two apartments which I am renting out however my parents are receiving the money from it. Should I still pay Zakat even if I don’t receive the money?

If you are transferring the funds every time the rent is paid, in that scenario, if your Zakat date falls before you have transferred that month’s rent, you will liable to pay Zakat on those funds. Rent which is transferred to your parents is not liable to Zakat for you.

I have an Islamic mortgage with monthly mortgage payments and rental income. How do I work out my Zakat for this?

On your Zakat anniversary, whatever residual or net cash you have remaining from your rental income should be added to your cash balance for Zakat purposes. If you have already spent the funds, then no Zakat is due.

I have signed an agreement to purchase a property in the last month of which 90% of my liquid cash will be used. I wanted to know given my current obligation and commitment for funds to be used in the next few months whether these funds should be included as part of my Zakat calculation i.e. added as a Zakatable asset rather than subtracted as a liability.

Until contracts have been exchanged and paying the deposit becomes a certain liability, Zakat should be paid on the cash. This is because there remains a possibility, at least in theory, of the sale/purchase not proceeding for whatever reason. Until it’s absolutely certain that the cash will leave you, Zakat should be paid.

Doing so will also remove any uncertainty and maximise the blessings of the process for you insha’Allah.

Is Zakat compulsory on land which has been given as a gift from my father? The land is in my name and is a piece of land in a residential area. If so, was the Zakat compulsory on me before I grew up and had my senses?

Zakat is not due on the land if you simply own it with no clear intention about what to do with it.

Is there Zakat due on land that is not developed? If yes, how is it calculated?

The answer depends on the intention with the land.

If the land has simply been inherited or purchased with no particular intention or as a store of wealth, then no Zakat is due.

If it was bought for investment, meaning capital appreciation purposes specifically, then Zakat is due on the approximate sale price of the land every year. One can delay the payment for each year for the time when the land is actually sold. In this case it will be due for each of the previous years based on the land value at the time.

Is Zakat payable on properties that you’ve bought the lease of? So, you’re the leaseholder, not the freeholder. Do you pay Zakat on it, and how is it calculated? If you own your property that you lived in, but you leave the property and rent out a cheaper accommodation so that you can get an income from it, do you pay Zakat on the value of your property? What do you do if you live in your home part of the year?

1. If one has purchased a leasehold, it is fair to assume that it has been purchased either to live in or to rent out and not with the prime intention of resale with capital appreciation. If this is correct, then only whatever is left over from one’s rental income on one’s Zakat anniversary needs to be considered.
2. In these circumstances, there is no Zakat. If you own a house and don’t live in it and don’t have any clear intention for its use, then there is no Zakat.

I have a query about how I calculate my Zakat when I have a mortgage to pay off and a large amount of money to pay off for borrowing money from relatives to help with my house deposit.

I pay approximately 300 GBP back to my relatives on a monthly basis and 750 GBP monthly on my mortgage.

Everything outstanding that you owe to your family is deductible if there is no binding contract in relation to the repayment terms.

The mortgage payments should not be deducted. Scholars give an allowance for up to one year’s worth of the non-interest portion of the payments to be deducted but this allowance should only be taken if one feels that not doing so significantly impacts one ability to make the repayments in a timely fashion. If it is an Islamic home purchase plan then these are not considered to be debt and therefore nothing is deductible

When calculating Zakat on annual rental income, should you deduct annual capital repayments on a mortgage, as well as service charge repayments and any other expenses, such as maintenance?

With rental property, the only thing to worry about is whatever is left over from the income that has been generated over the course of the year. So in fact, as long as you have accounted for the remaining cash from your rental income in your cash balance, there is nothing further to consider. Capital repayments, service charge, expenses etc that are upcoming will simply reflect in next year’s cash balance on your Zakat anniversary, i.e. the fact that you will have made those expenditures will mean that your cash balance will be lower and therefore that will factor into your Zakat calculation.

The only deductibles today are any overdue expenses or liabilities.

I have a mortgage for £130k so I have let the property out. Every month the tenants pay £1000. £500 of this is used to pay off the mortgage and the other £500 goes towards the bills in my mother’s house.

The money that I make from the house is not saved rather utilized so is it accountable for Zakat?

I live with my husband in his house. The house above was bought in order for my mother to have some sort of income when I left to get married.

Zakat would only be payable on any cash that you have remaining from your rental income. If all the cash has been used, then there is nothing to include from it in your calculation.

I currently have a mortgage and its monthly instalment is £550 per month.

To calculate my Zakat, will I need to deduct £6,600 (£550 x 12 months) as my liabilities?

Scholars do permit deducting up to 12 month’s worth of payments, but only the non-interest or principal portion of the payment. You can determine this split from your lender.

If you have an Islamic finance product then this is not considered to be debt and therefore nothing is deducted.

What if I own a property with rental income?

If you own property other than your home for the purposes of long-term investment without intention to resell then Zakat is due on rental income only. Please note if you are a property developer and you have already mentioned this in the Business section of our online calculator , do not input this information twice. If this is the case, and if rental income has not been included within your cash section, then please state its value in your Zakat calculation.

Zakat al Fitr (or Sadaqat al Fitr) is a duty that is paid on the occasion of Eid al Fitr (“Feast of Breaking the Fast”) and is required of every Muslim, whether male or female, minor or adult if the total value of his/her Zakatable assets (cash, gold, silver, merchandise) plus non-essential items (i.e. assets above his basic needs) minus liabilities (debts) equals or exceeds Nisab (the minimum amount that a Muslim must have before being obliged to give zakat).

A father must also pay on behalf of his pre-pubescent children if they do not have their own wealth equal to the Nisab. If they have their own wealth equal to the Nisab, they can pay their Zakat al Fitr from their own wealth. The head of the household may pay the required amount for the other family members. In terms of amounts, it is advisable to contact your local mosque and get them to give you the recommended amount to pay per head.

The differences

1. The first difference between Zakat and Zakat al Fitr is eligibility. All Muslims must pay Zakat al Fitr regardless of their age or financial status (unless they honestly do not have the means to do so, as they could be eligible to receive Zakat ul Fitr or Zakat themselves)
2. The second difference lies in the amount due. The amount attributed to Zakat al Fitr is very small. Zakat, however, can amount to a larger number because its 2.5% of all net savings.
3. The third and final difference lies in their due dates. Zakat can be paid at any time, with the only condition being that the earnings reflect one year’s worth of net savings (one lunar year). Zakat al Fitr, however, goes hand in hand with Ramadan. Zakat al Fitr is paid during Ramadan before the month ends. It needs to be paid before the Eid prayers at the very latest. This is a very specific time frame that all Muslims must abide to.

And Allah knows best!

Zakat is not a random form of charity or imposed tax; Zakat is not a means of giving to be generous – it is something that Allah has ordained us to do – it is an obligation. As Muslims, Zakat has been set out as one of the pillars of Islam to achieve financial and spiritual reform, eliminate greed and consolidate the Islamic economy – this, in turn, will lead to its stability and prosperity.

The Qur’an describes Zakat as: The means by which to attain Allah’s mercy

“My Mercy extends to all things. That (Mercy) I shall ordain for those who have God-consciousness and give their Zakat and those who believe in Our Signs.” (Surah Al-A`raf 7:156).

A precondition to obtaining Allah’s help

“Allah will certainly aid those who aid His (cause); for verily Allah is Full of Strength, Exalted in Might, (able to enforce His Will). (They are) those who, if We establish them in the land, establish regular prayer and give their Zakat, enjoin the right and forbid wrong: with Allah rests the outcome of all affairs.” (Surah Al-Hajj 22:40-41).

A sign of brotherhood in religion

“But (even so), if they repent, establish regular prayers, and give their Zakat, they are your brethren in Faith.” (Surah Al-Taubah 9:11).

A distinctive feature of the faithful community

“The Believers, men and women, are protectors one of another: they enjoin what is just and forbid what is evil: they observe regular prayers, pay their Zakat and obey Allah and His Messenger. On them will Allah pour His Mercy: for Allah is Exalted in power, Wise.” (Surah Al-Taubah 9:71).

A distinctive quality of the believers who go to and maintain mosques

“The mosques of Allah shall be visited and maintained by such as believe in Allah and the Last Day, establish regular prayers, and pay their Zakat and fear none (at all) except Allah.” (Surah Al-Taubah 9:18).

A distinctive quality of the true believers

“Who are active in paying Zakat.” (Surah Al-Mu’minun 23:4).

And as important as Salah “And establish the prayer and pay the Zakat and bow (in prayer) with those who bow.” (Al-Baqarah: 43)

Zakat is something that has been divinely ordained and is regarded as the right of both Allah and the poor.

How many times is Zakat mentioned in the Quran?

The word Zakat is mentioned thirty-two times in the Quran. Thirty of the thirty-two are in the technical meaning of Zakat whilst two are in the linguistic meaning of Zakat. 

The two places are: 

1. Sūrah al-Kahf (The Chapter of The Cave), verse 81 – (a reference to purity, honesty, uprightness) 

1. Sūrah Maryam (The Chapter of Mary), verse 13 – (purification, blessings, development, enhancement in light of what’s best and highest level of piety) 

And Allah knows best! 

Zakat is due on certain types of wealth when it reaches the minimum threshold (nisab) and has been held for one lunar year. These include cash (in hand or bank), gold and silver, business inventory, stocks, and rental income savings. If you own property or items like jewellery or shares for resale, those are also zakatable.

Zakat is not due on every pension; Zakat is only payable on certain types of pension.

Zakat is not due on defined benefit schemes. Therefore, final salary and CARE schemes are not Zakatable.

Zakat is only due on defined contribution schemes in proportion to the underlying Zakatable assets in the fund.

Ideally, a person should calculate Zakat on pensions by reviewing the ratio of Zakatable assets in their portfolio.

To determine the type of fund you have, check your pension statements or ask your HR department for more information.

Allah knows best

Common Questions

Does Zakat need to be paid on pension assets?

• There is no Zakat due on National Insurance contributions. If one is receiving payments from a government pension, then one simply needs to factor in the residual cash in possession on the Zakat due date.
• If one has a final salary scheme, then no Zakat is due since there is no quantifiable or specific amount of wealth being held in the name of the pension holder. However, scholars have questioned the Shari’ah compliance of such schemes and further advice should be sought on this matter.
• If one has a money purchase scheme, which is nowadays the most common, then the view of the scholars at Al-Qalam Shari’ah Panel is that such pension schemes whose fund value is determinable and where the funds are being invested on behalf of the holder are subject to Zakat. Examples of money purchase schemes include SIPPs as well as pensions offered by private sector employers.

Why does Zakat need to be paid on these pension funds when one has no access to them?

In this case, one has effectively allowed/volunteered to cede control to an investment manager with the express motivation of growing a portfolio on behalf of oneself. So there is clearly wealth that is subject to growth and it is a pot of specific investments with a definable value, held in the individual’s name. Even though one does not have complete possession, the characteristics of such schemes have led scholars to conclude that they fulfil sufficient criteria to be considered Zakatable.

How do I calculate Zakat on pension funds?

Zakat is almost never due on the entire quoted value of the pension fund. This is because the amount of Zakat that needs to be paid is determined by the nature of the underlying investments, which is usually stocks and shares.

In this case, Zakat is due on one’s proportionate ownership of the net Zakatable assets of the companies in which investments are held. Normally this is calculated by finding out which stocks are owned, how many shares are owned and then by using the company balance sheets to work out roughly what the Zakatable assets are in each firm.

If it is difficult for this to be determined then a recommended rule of thumb is simply to take 25% of the current market value of the portfolio as a proxy for the net Zakatable assets of the underlying companies and then pay 2.5% of this figure.

e.g. if the portfolio is worth £10,000 and held entirely in stocks and shares, take 25% which is £4,000 and then 2.5% of this which would be £100.

This rule of thumb was extracted after NZF conducted some analysis on the balance sheets of listed companies and compared their likely net Zakatable assets to their market values.

Note that some Sharia-compliant investment funds are based around property/rental investments only, in which case it is possible that no Zakat might be payable.

If part of the pension is held in cash, then Zakat would be due on all of that portion, minus the interest of course, which should eventually be given away entirely.

Does the Zakat on pension funds need to be paid straight away?

If the relevant amount of Zakat can be paid on an annual basis then this is preferable. However, it is permissible to wait until funds are realised upon retirement and then pay the Zakat that has been noted down from previous years at this point. Although permissible, this approach may of course lead to a significant build up in Zakat payable by the time one gains complete access to one’s pension funds.

I am currently working for a company that provides a final salary scheme for my pension at retirement. Should I take this into account when calculating my Zakat?

A final salary scheme is a defined benefit pension scheme in which the pension holder never secures ownership of the pension contributions prior to receiving the pension payments. Therefore, you do not need to pay Zakat on the company’s contribution until it finally comes into your possession when the pension matures.

Regarding pensions: if you are NOT able to dictate how your pension assets are invested, do you pay Zakat on this? For example, I work for the NHS and each month part of my pay goes towards the NHS pension scheme – I do not have a say in how this is invested.

Even if you cannot determine exactly how the assets are invested, but if they are being invested on your behalf and you are able to determine a specific value of funds that are attributable to you, then according to the view of the Al-Qalam Shari’ah Panel, the pension is subject to Zakat.

How much is then paid depends on the nature of the assets in which the funds are invested. If they are invested in shares/equities, then you can safely assume that 25% of the value of the funds is subject to Zakat. If cash, then 100% is subject to Zakat.

I was hoping you could shed some light on whether or not it is applicable to pay Zakat of my pension. If so, how is the calculation done in case I don’t have access to knowing how much pension I have saved. My workplace has a pension scheme where they invest my pension for me.

NZF advocates the view that Zakat is payable on money purchase and/or defined contribution schemes. The point here is that although there is no access, one has effectively allowed/volunteered to cede control to an investment manager with the express motivation of growing a portfolio on behalf of oneself. So there is clearly wealth that is subject to growth and it is a definable pot of specific investments with a definable value, effectively held in the individual’s name regardless of whether the employer or employee contributed.

That said, Zakat is never due on the market value – this would only be the case if you could sell your pension assets which you can’t of course.

That’s why it’s important to know what the investments are composed of in order to be able to calculate Zakat accurately. Some Shari’ah-compliant investment funds are based around property/rental investments only, in which case no Zakat might be due. If stocks and shares, then Zakat is due on the proportionate ownership of cash and other Zakatable assets in the underlying companies and we advocate using 25% of the market value as a proxy for the proportion of Zakatable assets in the firm. e.g. £10,000 of shares in one’s pension. Zakat would be due on £4,000, so £100 to pay. If part of the pension is held in cash, then Zakat would be due on all of that portion, minus the interest of course. As an aside, the Shari’ah compliance of the investments is of course critical to determine.

You are permitted to delay payment of the Zakat on your pension assets for all of your years prior to retirement until your pension matures and you start to receive funds from it. It is however preferable where possible to pay for each year as you go along from other assets if possible.

I am confused about Zakat on pensions. The two types of pensions I’m looking at are

1. Employer + Employee pension. Deducted at source, i.e. not in my possession. Cannot be touched or taken until age 65.

2. State pension in the UK which residents are entitled to. I have no idea what it will be but it is being accumulated via my National Insurance contributions.

My questions:

1. Is Zakat due on these pensions now even though I am unable to access this money for 40 years or so and what I get in future may be different to my estimate since the personal tax on pensions has changed in the UK and will probably change again?

2. Or do I wait until I receive the money (Allah knows best) then pay Zakat at that point.

3. If the answer is 2. then is that retrospectively?

How is that possible for say state pension?

You can ignore the state pension because as you said it’s undefinable in its value.

Zakat is payable on money purchase and/or defined contribution schemes. The point here is that although there is no access, one has effectively allowed/volunteered to cede control to an investment manager with the express motivation of growing a portfolio on behalf of oneself. So there is clearly wealth that is subject to growth and it is a definable pot of specific investments with a definable value, effectively held in the individual’s name regardless of whether the employer or employee contributed.

That said, Zakat is never due on the market value – this would only be the case if you could sell your pension assets which you can’t of course.

That’s why it’s important to know what the investments are composed of in order to be able to calculate Zakat accurately. Some Shari’ah compliant investment funds are based around property/rental investments only, in which case no Zakat might be due. If stocks and shares, then Zakat is due on the proportionate ownership of cash and other Zakatable assets in the underlying companies and we advocate using 25% of the market value as a proxy for the proportion of Zakatable assets in the firm. e.g. £10,000 of shares in one’s pension. Zakat would be due on £4,000, so £100 to pay. If part of the pension is held in cash, then Zakat would be due on all of that portion, minus the interest of course. As an aside, the Shari’ah compliance of the investments is of course critical to determine.

You are permitted to delay payment of the Zakat on your pension assets for all of your years prior to retirement until your pension matures and you start to receive funds from it. It is however preferable where possible to pay for each year as you go along from other assets if possible.

I wanted to ask a question regarding Zakat payments due on a SIPP (Personal Pension). I am a contractor and so took it upon myself to take about a pension about 11 years ago. The first 7 months it was in a standard HSBC Stakeholder pension fund as I didn’t know it wasn’t halal and didn’t realise halal funds where available. After I realised, I switched it to an Amanah Fund. It only became clear to me recently that I need to pay Zakat on this pot of money. I’ve been trying to work out how much I owe.

My question is twofold:

1. How do I cleanse the profit gained in the first 7 months where it was not invested in a Sharia-compliant fund.

2. Is it correct that the simple method for working out how much Zakat is due is to take 25% of the pension pot value each statement year and then apply a 2.5% zakat on that? So for example, if my pension is worth £10k now, I would only pay £100 ( (10,000 x 0.40) x 0.025)

1. The way to purify your wealth for the first 7 months is simply to work out what capital appreciation if any, occurred on the original amount you put into the impermissible fund before you transferred it all into the new fund and then to give that amount away as Sadaqah or voluntary donation.
   E.g. you invested £5,000 originally then 7 months later this was worth £5,500 when you moved to HSBC Amanah. You should cleanse by paying £500 Sadaqah.
2. The 25% rule is a proxy for those who own shares via a pension fund or as a long-term investment who are unable to determine the Zakatable assets of the underlying firms in which shares are held. Based on preliminary research, 25% is used to safely approximate the value of the Zakatable assets of a firm as compared to its market value.

So your calculation on the figures you have quoted would be correct.

We hope to produce further detailed guidance on this matter in the coming months insha’Allah, including a specific calculation for the HSBC Amanah index.

At the moment I am paying into NHS pensions. I have control of the money that I pay in but cannot withdraw any amount once I have paid it. Secondly, NHS pension scheme does not invest our contributions. Does this mean I have to pay Zakat now and also when I start draw my pensions?

In terms of the Zakat treatment of the NHS pension, then there will not be any Zakat payable if it is a final salary scheme.

Does it make a difference whether the contributions are from the pension holder or an employer?

Once the funds have been paid into the pension pot, it does not make a difference who made the contribution. The entire pension pot now belongs to the pension holder and therefore it all needs to be considered for Zakat purposes.

Q: Is Zakat due on a Self Invested Personal Pension (SIPP)?

A: Since the Self Invested Personal Pension is a type of defined contribution scheme, you will be liable to pay Zakat on the Zakatable assets in the portfolio annually.

Q: Is Zakat due on an equity pension?

A: Equities represent shares in different companies. If the pension portfolio only consists of equities, We advise taking 25% of the current market value of the portfolio as a proxy and then paying 2.5% of this figure as Zakat. According to our research, 25% is a safe proxy for Zakatable assets in equities. This rule of thumb was determined after extensive research. Our research can be seen online on our website.

Q: Is Zakat due on an Additional Voluntary Contributions (AVC pension plan)? 

A: If the Additional Voluntary Contribution Plan is a defined contribution scheme which it very like would be, you will need to pay Zakat on the Zakatable assets in the portfolio annually.

Q: Is Zakat due on the same asset class as fixed interest/income in a pension fund?

A: Fixed interest/income includes bonds, gilts, high yield credits, money markets etc. Despite the unlawful nature of this investment, the invested capital is 100% Zakatable whilst returns are unlawful and must be dispensed in charity.

Q: How can I determine the type of pension I have?

A: To determine the type of your pension, you can check your pension statements, call your pension provider or (if it is a workplace pension) consult the HR department.

Q: What is the evidence that Zakat is due on Pensions?

A: A pension fund is composed of a number of Zakatable assets such as cash, gold, silver, business stock and equities of Zakatable assets. Therefore, the same evidence which applies individually to these asset classes applies to these assets in a pension fund.

Q: When should Zakat be paid on a defined contribution pension scheme?

A: Zakat on a pension fund is due immediately with the rest of one’s Zakat. However, if the Zakat payment is relatively large, one may spread these payments out across the year and pay in advance of one’s Zakat anniversary. On one’s Zakat anniversary, a Zakat calculation must be made to ensure the total Zakat liability has been paid.

If the Zakat payment on the pension savings is beyond one’s financial capacity and brings genuine difficulty to oneself, one should pay whatever small amount they can at present. In addition, they should keep a record of what is outstanding and intend to pay it off in the future when finances permit.

Q: Are all asset classes in a pension fund Zakatable?

A: A pension fund generally invests in a range of assets. Some assets in the pension fund are Zakatable whilst others are not Zakatable. Common Zakatable assets in a pension fund include:

• equities
• fixed income
• precious metals
• cash and equivalents or alternatives (e.g. cryptocurrencies)
• commodities

Q: How are work pensions included in the Zakat calculations if there is no monthly income paid from pensions whilst in work?

A: You will pay Zakat on the most current value of your pension pot on your Zakat day. This is provided that the scheme is a defined contribution scheme or money purchase scheme.

Q: Is Zakat due on precious metals in a pension portfolio?

A: If precious metals consist of gold or silver, then these are Zakatable at 100%. Other precious metals are not Zakatable unless they are commodities and purchased to resell for capital gain. If they are ETFs these are usually not shariah compliant and are therefore not deductible.

Zakat is not due on personal property like your home, car, or furniture, as these are not intended for resale or business purposes. However, if you own rental property, zakat is due on the savings from the rental income, but not on the property itself. If you buy and sell real estate for profit, zakat is due on the market value of the property, as it’s considered a trade asset.

For fixed assets like machinery, equipment, or vehicles used in business, zakat is not due on the items themselves, but you must pay zakat on any profits or savings generated from using these assets in the business. Essentially, zakat applies to wealth that is liquid or easily tradable, not to things you use personally or for business operations

The history of Zakat is the same as that of Salat (prayer). It is evident from the Qur’an that like Salat, the act of Zakat has always existed in the law of the previous prophets.

All the followers of the religion of Ibrahim (Upon whom be peace) were fully aware of the concept of Zakat. For this very reason Surah Al-Ma’arij (70:25) describes it as “A specified right.” Because of Zakat and charity being a pre-existing Sunnah, the Prophet (peace be upon him), continued this act of worship with necessary reforms.

The Qur’an gives examples in several verses telling us how Zakat was imposed on the previous Prophets. For example:

Zakat of Prophet Isma’il (Upon whom be peace): “Also mention in the Book (the story of) Isma’il: He was (strictly) true to what he promised, and he was an apostle (and) a prophet. He used to enjoin on his people Salat and Zakat, and he was most acceptable in the sight of his Lord.”
 [Surah Mariam 19:54-55]

Zakat of the Jews: “And (remember) when We made a covenant with the Children of Israel, (saying): Worship none save Allah (only) and be good to parents and to kindred and to orphans and the needy and speak kindly to mankind; and establish Salaah and pay Zakat.” [Surah Al-Baqarah 2:83]

Zakat to the progeny of Prophet Ishaaq (Upon whom be peace): and Prophet Yaqub (Upon whom be peace): “And We sent them inspiration to do good deeds and to be diligent in the Salat and pay Zakat.” [Surah Al-Anbiyaa 21:73]

Zakat of Prophet Isa (Upon whom be peace): “He said: Lo! I am the slave of Allah. He has given me the Scripture and has appointed me a Prophet. And has made me blessed wheresoever I may be and has enjoined upon me Salat and Zakat so long as I remain alive.” [Surah Maryam 19:30-31]

Zakat in the time of the Prophet (peace be upon him)

When we go back to the way Zakat was at the time of the Prophet (peace be upon him), in essence we are studying Zakat from its source – from its beginnings. In Makkah, the verses on Zakat generally pertained to voluntary payments, and it was left to the individuals faith and own conscience to decide how much to give and whom to give it to.

Surah Al-Ma’arij (70:24-25) advises: “And in whose wealth there is a right acknowledged. For the beggar and the destitute.”

After migration to Madina, around eighteen months after the arrival of the Prophet (peace be upon him) to Madina, Zakat became a Fard, or an obligation on Muslims. Madina verses gave clear directives, ordering the payment of Zakat and since that time the Prophet (peace be upon him) used to send out Zakat workers to collect and distribute the due Zakat.

The Qur’an does not give the definition of Zakatable wealth, except in a few cases, only the general principles are given without the details, e.g:

1. Gold and Silver: “And there are those who hoard gold and silver and spend it not in the way of Allah. Announce unto them a most grievous penalty.” (Surah Al-Taubah 9:34)
2. Crops and Fruits: “Eat of their fruit in their season, but render the dues that are proper on the day that the harvest is gathered.” (Surah al-An’am 6:141)
3. Earnings of Trade: “O ye who believe, give of the good things which ye have earned.” (Surah Al-Baqarah 2:267)
4. Wealth from beneath the earth: “And of that which we have produced for you from the earth.” (Surah Al-Baqarah 2:267)

Furthermore, the Qur’an mentions Zakat in general and the word amwal (i.e. property or wealth or earning) is used as in the verse, “Out of their wealth take Sadaqah thereby purifying and sanctifying them.” (Surah Al-Taubah 9:103) and, “In their wealth and properties is the right of the poor, the beggar and he who is in deprivation.” (Surah Al-Dhariyat 51:19)

It is the Sunnah of the Prophet (peace be upon him) that gives us, by example and by directives, details of the general Qur’anic command and converts the theoretical axioms of the Qur’an into a living reality. The Prophet (peace be upon him) is the one who knows most about what Allah ordained and as such the Sunnah gives us detailed specifications of the kinds of Zakatable wealth, the minimum exempt of each of them and the applicable rates. The Sunnah also gives the details of the categories of people that should receive Zakat.

When calculating zakat, you can subtract certain liabilities or expenses from your total wealth. These include any outstanding debts you owe, such as loans or credit, as well as necessary business expenses like salaries and operational costs. If you’re owed money (e.g., loans or payments from clients), zakat is not due on that amount until it’s received. You can also subtract any zakat payments you’ve already made in the same year. However, personal living expenses, such as food, clothing, and rent, are not deductible when calculating zakat. Once these liabilities are deducted, zakat is then due on the remaining wealth at the standard rate of 2.5%.

Gold and silver in whichever form they are in (jewellery, coins, ingots etc.) are all subject to Zakat.

If you own personal items made from a mixture of metals, then the gold/silver content is liable to Zakat in the mixed metal.

How much gold or silver do you have to own before Zakat is payable?

This question can be answered in the context of your net assets. You then need to establish whether your net assets equal or exceed the Nisab threshold. If you equal or exceed the Nisab threshold then Zakat is due on all your wealth at 2.5%.

Zakat is due on two types of precious metals – gold and silver.

Gold and silver are used as the basis for calculating your Nisab regardless of currency. This is the threshold of wealth you need to own before Zakat is due.

How do I calculate the value of my gold or silver?

Your local gold jeweller can tell you the current value of your gold assets.

They can do this in two ways:

• They can give you the current value they would buy your gold at if you were to sell it
• Or they can give you the weight of the gold and you can calculate the value using today’s live gold price in grams – this is known as the universal measurement. This is perhaps most suitable to ensure 100% accuracy.

Is there Zakat on white gold jewellery?

White gold is an alloy of gold and at least one white metal, usually silver, nickel, manganese, or palladium. This is added to add durability and strength, as pure gold is a very soft metal. White gold is treated like normal gold and is subject to Zakāt, as it contains pure gold.

As some scholars are of the opinion that mixed metals are only liable to Zakat if half or more of the metal is gold or silver, you only have to pay Zakat on the gold, but not the silver part of white gold.

The amount of Zakāt payable would be calculated by multiplying the full weight of the jewellery by the price per gram for gold of that carat.

Example calculations

For example, if one has an 18 carat white gold bangle weighing 50 grams, then 50 grams would be multiplied by the price of a gram of 18 carat gold. This is because 18 carat gold is 18/24 pure gold, so out of the total weight of 50 grams, 37.5 is pure gold.

Likewise, if one has a 9 carat white gold bangle weighing 50 grams, then 50 grams will be multiplied by the price of a gram of 9 carat gold. Similarly, this is because 9 carat gold is 9/24 pure gold, so it contains 18.75 grams of pure gold. Some scholars are of the opinion that there is no zakat on the 9 carat (pure) gold. 

Tolas, Boris, and Voris

It is worth noting that in the South Asian subcontinent (i.e. India, Pakistan, Bangladesh, and Nepal), grams may not be used to measure silver and gold. Instead, one of three possible units of measurement may be used; these are either: Tolas, Boris or Voris.

One Tola or Bori or Vori is equivalent to 11.66 grams.

We know that the Nisab threshold for gold is 87.48 grams, so this is the equivalent to 7.5 (87.48/11.66) Tolas, Voris, or Bhoris.

What gold or silver items are Zakatable?

Gold or Silver kept as an investment

Gold and silver, in whichever form kept, as an investment, are always Zakatable.

Personal use ornaments

Items containing gold or silver purchased for personal use as ornaments are Zakatable. This includes ornaments used for house decoration and utensils (such as silver spoons etc).

Gold or Silver designated for personal use

There are differences of opinion regarding whether or not gold and silver jewellery that is kept for personal use should be exempt from Zakat. According to the Hanafi school, Zakat is due on this gold and silver. According to the other schools of Islamic law, Zakat is not due on this even if it was used once in a given year.

Other precious metals, stones and mixed assets

Other precious metals like platinum and precious stones such as diamonds, pearls and rubies are not subject to Zakat.

Those required to pay Zakat must be:

• Adult (have reached the age of puberty)
• Muslim (Zakat is not paid by non-Muslims)
• Sane
• In complete ownership of the Nisab

Differences of opinion:

• The orphan
• The child (pre-puberty)
• The mad/insane

The three schools of jurisprudence other than the Hanafi school state that Zakat should be paid on qualifying wealth owned by the orphan, child and the insane .

The three schools of jurisprudence consider the ownership of wealth reaching the Nisab as the driving factor behind the Zakat obligation. Furthermore, the child, insane and orphan’s wealth will also benefit from the purification of wealth due to the payment of Zakat.

The Hanafi school considers the element of worship in Zakat and therefore opines that Zakat is not binding on the orphan, child and insane. Since these individuals are not obliged to perform worship, they are not obliged to pay Zakat. However, if a person has intermittent sanity, they will be required to pay Zakat. Only a person with continuous insanity and mental incapacity is exempt from Zakat .

The parent/guardian will be responsible to pay Zakat on the wealth of the orphan, child and insane. They can pay from the wealth of these individuals.

Conditions that make Zakat obligatory

Zakat is obligatory if an individual possesses wealth to the value of the Nisab (minimum threshold). According to Sharia, such a person is deemed to be rich. Zakat is imposed by both the Qur’an and the Sunnah and the Prophet (peace be upon him) himself listed Zakatable items and monetary rates to be charged on each of them. The Prophet (peace be upon him) also gave us exemptions and regimented criteria of Zakat, Zakatable items and general Zakatability. Everything has been written for and given to us, SubhanAllah! – and it is our role as pious Muslims to adhere to what we have been commanded to do.

Conditions for Zakat to be obligatory on wealth:

• Complete ownership
• The wealth has the ability to grow and increase
• The wealth has reached the Nisab
• A whole lunar year passes after possessing the Nisab

Zakat is meant to help relieve the poor without impoverishing the rich; once you have reached the Nisab threshold you are only required to give 2.5% of your Zakatable assets. In essence, we are required to give a little from a lot – and in doing so, not do ourselves any financial damage whilst providing security for those in need.

Common Questions:

Q) My daughter is 9 years old and she has received gold gifts over the years. Do we need to pay Zakat on this amount?

A) Those required to pay Zakat must be: adult (having reached puberty), Muslim, sane, and have complete ownership of the Nisab. All three schools of law other than the Hanafi school of law state that Zakat should be paid on qualifying wealth owned by the insane and children. So, depending on which school you adhere to and if your child’s assets are above the Nisab, you can pay Zakat on this gold.

And Allah knows best.

A share represents part-ownership of a company, by owning shares in a company, you own a portion of that company.

If you bought shares with the sole intention to sell, Zakat is payable at the current market value.

If you bought shares for any other reason (eg. dividend income) or with mixed intentions, then Zakat is payable on the underlying assets of the business. In this case, we recommend 25% of the market value as a suitable proxy, which our Zakat calculator will automatically apply.

This proxy was established by reviewing the balance sheets of the FTSE 100 companies. 66 out of 100 had net Zakatable assets below 25%. The other 34 were non-compliant companies. Hence, the majority of the companies have net Zakatable assets below 25%.

Allah knows best

The majority of scholars agree that Zakat is to be paid and received by Muslims only. Zakat is subject to many rules when it comes to its discharge and distribution.

For example, according to the Hanafi school of jurisprudence, a child who is wealthy is not required to pay Zakat. Similarly, a person cannot give Zakat to his parents or children etc. Another example is that one cannot use Zakat money to cook some meals to feed the poor people.

Other ways to help non-Muslims in need

However, these rules are not restricted to other acts of charity such as Sadaqah which can be given to anyone and can also take many forms.

For example, the Messenger of Allah (peace be upon him) said: “If a Muslim plants a tree, or sows a field and men and beasts and birds eat from it, all of it is charity from him.” [narrated in Muslim]

Hence we encourage Muslims to also spend as much Sadaqah as possible to help both Muslims and non-Muslims (whether poor or not) in whatever form possible.

Once you’ve worked out how much you own which is eligible for Zakat (if you haven’t, you can use our Zakat Calculator), you need to work out what you can take off.

It’s acceptable to take away one year’s worth of debt payments from your Zakat amount, but ideally, this should only be done if paying Zakat is likely to stop you from being able to afford the debt payments.

If you’re likely to be able to repay the debt and you will not be affected by paying Zakat, then we advise that the debt shouldn’t be taken off.

What has Zakat got to do with debt?

Zakat is payable on strong debts, i.e. money that is owed to you that you are confident will be paid. This may include personal loans to friends and family. This does not include outstanding wages, dowry, inheritance or assets held in trust (other than assets held under a Bare Trust).

A bare trust (or a naked trust) is a basic trust in which the beneficiary has the right to the assets within the trust, alongside the income generated from the capital from within the trust. This typically happens when they are 18 or 16, depending on the country, so naturally, these are used to pass assets onto younger people. In the meantime, the trustees are responsible to look after the trust.

Zakat is a fair concept, it is not imposed to unfairly take funds from you and leave you without the means to go about your day to day life at the standard you are used to. Everything in Islam is fair masha’Allah and Zakat is no different.

Certain liabilities/allowances can be deducted from your Zakatable assets before calculating how much Zakat you owe. Some debts must be included in your Zakat calculation, others do not need to be. Debts and liabilities when calculating Zakat are very important factors that must be taken into account.

What you can take off: 

• Debts that need to be fully paid off within 12 months
• Up to 12 months instalments of longer-term debts which are due to be repaid over several years
• Arrears and/or overdue payment

What can’t you take off: 

• Future expenses and bills which are not yet due e.g. next month’s rent or bills
• Debts that are not payable at all in the next 12 months e.g. a student loan which is not owed until study is complete and a person is earning a certain amount
• Unlawful payments such as interest. Interest is not allowed in Islam but if a person does engage in interest or has interest due on debt this can’t be taken off the Zakat amount.

Your Questions Answered

Q: Do outstanding debts (e.g. student loans) impact what I have to pay Zakat on?

For long term debts, such as mortgages or student loans, only the amounts which are due to be paid imminently, or are overdue, at the time of the Zakat payment should be deducted for calculation purposes.

Student loans in particular, in the vast majority of cases, are deducted at source anyway and since one never sees that wealth, it is not worthy of deduction. The other point to note here is that when one is at university then there is no requirement to pay back any of the debt at the time and so nothing should be deducted at that stage either.

Q: What’s the difference between personal debts and long-term debts, when it comes to paying Zakat?

Personal debts

Any personal debts can be deducted. By personal debt, we mean a loan between friends or family that is recallable at any time.

Let’s say your friend lent you £500 and said you could pay it back in six months’ time. They could still demand it from you immediately, at any time. Such loans are deductible from the Zakatable assets of the debtor and are added to the Zakatable assets of the creditor before Zakat is paid. In this case you would subtract £500, and your friend would add £500 in their calculation.

Long-term debts

Long-term debts like student loans and mortgages are different because the lender cannot demand the outstanding balance at any time they feel like it.

In this case, scholars give the allowance of up to 12 months’ worth of non-interest portion of upcoming payments to be deducted from one’s assets before calculating Zakat. However, this allowance should only be taken if, by not doing so, one feels that one’s ability to make the repayments is impacted.

Let’s say I have £10,000 today and my upcoming payments for my mortgage are £12,000. Either I can pay £250 of Zakat on £10,000 or subtract £12,000 and pay no Zakat at all. The question is, by paying £250 of Zakat today, am I really affecting my ability to pay £12,000 back over the next 12 months? This seems unlikely and so the allowance should only be taken if one is really in a difficult situation, e.g. lost job and no income and fearing the risk of being unable to make repayments.

Allah knows best

Zakat is the third pillar of Islam. It requires Muslims to give 2.5% of their qualifying wealth each year to help Muslims who need it across a range of categories. Zakat is both a spiritual duty and a vital part of the Islamic social welfare system.

Zakat is more than just a payment or a random act of charity. It’s a unique form of religious social welfare which benefits the whole community.

Once Zakat becomes due then the scholars are of the opinion that it must be paid without delaying it unless there is a valid reason to do so.

If one is unable to pay the Zakat in one payment then he/she may be able to pay in instalments as long as the total amount due is paid. Scholars are of the view that Zakat may be paid monthly, as long it is done in advance of the due date.

Managing Zakat payments

In order to pay your Zakat annually when it is due, you can estimate how much Zakat you will be expected to pay and ensure you save throughout the year. Scholars accept that this is possible.

You should always keep in mind when either paying in monthly instalments or saving monthly amounts, the intention that it is for your Zakat.