According to the Hanafi madhab, Zakat must be paid by Muslim adults who are mentally sane and in possession of an amount of wealth (net assets) above the nisab.
The Shafi, Maliki and Hanbali madhabs are of the view that Zakat is also payable by children and the insane, as long as their wealth is above the nisab threshold.
The word nisab means the minimum amount of property or wealth / assets that must be owned by a Muslim before they are obliged to start paying Zakat. This minimum amount is called the nisab threshold.
You first become eligible to pay Zakat the day your wealth reaches the nisab threshold. The Zakat is calculated and paid on the wealth of a person after a full lunar (Islamic) year. A lunar year is around 354 days long.
Example: Abdullah has recently started working and is paid £1,000 after one month. He has no debts and therefore his wealth is the full £1,000. The nisab threshold at the time is £190. Therefore, Abdullah becomes obliged to pay Zakat as his new wealth is above the nisab threshold.
After 354 days – a full lunar year – it’s time for Abdullah to reassess his situation and see how much wealth / net assets he has over and above the nisab threshold.
Abdullah works out that he has saved £10,000 and has immediate/short-term debts of £2,000.
Hence, at the end of the lunar year, Abdullah’s wealth or net assets are worth £8,000 and the nisab at that point in time is £200.
Therefore, Abdullah will need to pay 2.5% of the £8,000 as Zakat, which is £200.
Many Muslims pay their Zakat during Ramadan, as it is easy for them to remember when the Zakat is due. Often, they pay on the 27th night of Ramadan to try and maximise their rewards.
The more correct Islamic process, however, is to calculate and pay the Zakat one lunar / Islamic year from the day your wealth exceeded the nisab threshold.
The nisab is the minimum amount of wealth a Muslim must possess before they become eligible to pay Zakat. This amount is often referred to as the nisab threshold.
Gold and silver are the two values used to calculate the nisab threshold. The nisab is the value of 87.48 grams of gold or 612.36 grams of silver. You can find the current values on our website or at a jewellery store.
In the Hanafi madhab, the value of silver is used to ascertain the nisab threshold and eligibility to pay Zakat. The other madhabs use the value of gold.
Islamic Relief advises its donors to use the silver value (which is almost always a lower nisab threshold to gold) as this allows for a greater amount of your wealth to be eligible for Zakat which, in turn, means more help for the deserving recipients of your Zakat.
In explanations of Zakat, you may hear the term hawl – which means a lunar year. A hawl (lunar year) is 354 days long. Sometimes it is simply referred to as an Islamic year.
The actual payment of Zakat is to be made one hawl (lunar year) after you become eligible to pay Zakat, if your wealth on that date is still at – or above – the nisab threshold.
The moment you possess wealth above the nisab threshold you become eligible to pay Zakat. However, no payment is due on that date itself.
The Zakat is to be paid after one full hawl– but only if your wealth at that future date is still above the nisab threshold.
It does not matter if your wealth decreases or increases during the year. It is the value of your wealth / assets at the end of the lunar year that is used to calculate and pay the Zakat (if it still exceeds the nisab).
Example 1: The nisab threshold is £200 today and Abdullah has £1,000 in savings and no debt. His wealth / net assets are £1,000 and, therefore, he becomes eligible to pay Zakat.
After a hawl / lunar year passes, Abdullah has become richer and has savings of £2,000. The nisab threshold has also risen to £210 over the year.
As Abdullah’s wealth is still above the nisab threshold at the end of the year, he must therefore pay Zakat on the £2,000. The amount of Zakat to be paid must be calculated on the value of his wealth/assets at the end of the hawl (lunar year).
Example 2: The nisab threshold is £200 today and Abdullah has £1,000 in savings and no debt. His wealth / net assets are £1,000 and therefore he becomes eligible to pay Zakat.
After a hawl (lunar year) passes, Abdullah has become poorer and has savings of only £500. The nisab threshold has risen to £210 over the year, so Abdullah’s wealth is still above the nisab threshold at the end of the year. He must, therefore, pay Zakat only on the £500.
Example 3: The nisab threshold is £200 today and Abdullah has £1,000 in savings and no debt. His wealth / net assets are £1,000 and therefore he becomes eligible to pay Zakat.
After a hawl (lunar year) passes, however, Abdullah has lost his job and has savings of only £100. The nisab threshold has risen to £210 over the year, so Abdullah’s wealth is below the nisab threshold at the end of the year. Abdullah, therefore, does not need to pay Zakat for that year.
Your wealth or net assets can be summed up as the liquid assets you possess minus your short term liabilities.
Liquid assets are those that can be transformed into cash very easily. Short term liabilities include your bills, rent, personal loans and credit card debts. Most scholars agree that any mortgage that you may hold, should not be included in that calculation.
Here’s what should be included in your assets:
You do not need to count the value of your home or land as part of your assets. You also don’t need to include person items, such as a car, clothing, home appliances, etc. as part of your assets.
If you own investment properties (to buy / to let), then any saved rental income will be a part of your assets. The equity value of your investment property portfolio is not included as part of your assets in the Zakat calculation.
If any investment property is due to be sold around your Zakat due date, then the anticipated profit is to be included as part of your assets.
Here’s what should be included in your liabilities:
The calculation for your wealth/net assets is:
Assets – short term liability = your wealth.
As long as your wealth, is above the nisab of the day, you are eligible to pay Zakat.
According to the Hanafi madhab, all gold and silver you own, must be included as part of your wealth / assets in the Zakat calculation.
In the Shafi madhab, however, any gold and silver that is for personal use does not need to be included as part of your wealth / assets.
If all of your wealth is in gold, the value of the gold you own must be at – or above – the gold nisab in order to be eligible to pay Zakat.
If your wealth is a mixture of gold and/or silver and cash, it is preferable to use the silver nisab threshold.
Many scholars hold the view that it will be highly beneficial to include all gold and silver that you own as part of your wealth / assets, regardless of whether they are for personal use or not.
Abu Huraira (RA) reported that Prophet Muhammad (SAW) said:
“Charity does not in any way decrease wealth and the servant who forgives, Allah adds to his respect; and the one who shows humility, Allah elevates him in the estimation (of the people).” (Muslim)
If you possess shares for the purposes of trading, then you must include their value your wealth / assets.
However, if the shares you possess are not for trading, but rather held as an investment to deliver dividends, then it is only the dividends that need to be counted in your assets.
The same rule applies to property trading. If a property is purchased with an intention to resell it, then its value must be counted in your assets.
However, if a property is bought as an investment (for example to be let out) with the only benefit being the rental income, it is only the profit from the investment that is eligible to be counted under your assets.
A long-term mortgage is not to be counted as a liability in your Zakat calculation.
Loans that are taken out for a personal purposes can be subtracted as a liability in the Zakat calculation
Business stock has to be counted as an asset for Zakat purposes. The value to be used is what would appear on your balance sheet. Usually, it is the cost of purchasing the stock.
Business premises do not need to be counted as an asset in the calculation. Any property the business owns (land, retail units, etc.) also do not need to be counted as assets.
The Holy Qur’an (9:60) specifies eight categories for the distribution of Zakat:
Islamic Relief distributes your Zakat amongst the needy and poor.
This is not to be confused with the annual Zakat (Zakat al-Mal) payment.
Before the end of the month of Ramadan, every adult Muslim who has food in excess of her/his needs must pay what is known as Zakat al-Fitr or fitrana. They must pay for her/himself and can also pay on behalf of his or her dependants.
Zakat al-Fitr / fitrana must be paid before the Eid prayer is performed. It is to be paid in the form of what is considered as a staple food of the community.
As Islamic Relief acts as an agent for you, we can be given the money to pay for the food beforehand which we will then spend where needed at the correct time to buy and distribute the food amongst those in need.
Prophet Muhammad (SAW) determined the amount of food to be donated as being at least one sa’a weight of food. One sa’a is equivalent to four madd – and a madd is the amount that can be scooped up when one puts their hands together.
If we translate this into a cash value based upon the price of a staple food such as flour or rice, it is approximately £5 in today’s money.
Therefore, in the UK, the Zakat al-Fitr / fitrana is currently £5 per person.
You can pay your Zakat in advance of the due date, as long as you are confident that your wealth will remain stable.
It is also permissible to pay the Zakat due in instalments, although it is preferred to have it paid in one single transaction.
Q. Do non-Muslim have to pay Zakat?
A. No, Zakat is only prescribed for Muslims.
Q. If a child’s wealth has satisfied all the conditions of Zakat (i.e., it is above the Nisab and has been in their possession for one year,) should Zakat be paid on it?
A. No, Zakat is not due on it.
(The majority of the scholars in the past, however, favoured the opinion that Zakat should be paid by both children and the insane. In such cases, the guardian should take the Zakat from the person’s wealth and pay it on their behalf.)
Q. I have mixed assets of gold, silver and cash. Gold value: £800, Silver value: £100 and Cash: £100. The total value is £1000. Do I have to pay Zakat?
A. Yes, as the value of your total assets is more than the preferred Silver Nisab threshold of approx. £346 (and presuming you have met all the other requirements).
Q. Together, my spouse and I have wealth valued at £500. Can I pay Zakat for both of us?
A. As Zakat is an individual obligation, you must compare the Nisab with your own wealth and your spouse’s own wealth to see if each of you has to pay Zakat. If you do, you may pay Zakat for both yourself and your spouse as long as they have given their consent.
Q. If one has not yet possessed her/his wealth for one lunar year, can s/he still pay Zakat?
A. Yes he can pay Zakat, but one needs to consider present / future liabilities.
Q. My wealth dipped below the Nisab during the course of the year – do I still have to pay Zakat?
A. Yes, but refer to Scholar.
Q. I received a large amount of money just before my Zakat was due for this year. Do I include it in this year’s Zakat?
A. Yes you need to include this in your Zakat calculation.
Q. I paid Zakat on £4,000 last Ramadan. This year I have a total of £10,000 of wealth liable for Zakat. What value do I take the 2.5% from as I paid for the £4,000 last year?
A. Zakat is to be paid on the total savings regardless of what Zakat was paid on in the past. Therefore, you would pay 2.5% of £10,000, which is £250.
Q. I normally give a lot of money in charity throughout the year; do I still have to pay Zakat?
A. Zakat must be paid with the intention of paying Zakat. If one gives any other charity, it cannot be counted as Zakat if it did not carry the necessary intention. In such an instance, you would still have to pay Zakat.
Q. How much is Zakat?
A. Zakat is 2.5% of your total wealth. If, for example, you have £10,000 of wealth liable for Zakat, you would pay £250.
Q. I owe several years of Zakat, how do I pay?
A. For every year that you owe Zakat, take 2.5% from the total wealth you had at the end of that year and pay that in Zakat. If you are not sure how much wealth you had, you must estimate it to the best of your ability. For example, it is now Ramadan 2016 and if you have not paid Zakat for the last five years you need to work out how much wealth you owned every Ramadan for the last five years and pay 2.5% of that amount.
Q. Who are the recipients of Zakat-ul-Fitr / Fitrana?
A. The majority of scholars hold the opinion that only the first two categories of the recipients of Zakat can receive Zakat-ul-Fitr; ie, the poor and the needy.
Q. What do you mean when you say Islamic Relief acts as an agent and how does this allow me to pay my Zakat-ul-Fitr in money?
A. An agent is someone who facilitates the payment of your Zakat-ul-Fitr because they are better placed to distribute the food on your behalf. You can pay the agent in money because we use that money to buy the food which we give to appropriate beneficiaries. So, in reality, it is as if you are paying in food rather than in money.
Q. I have a shop where I sell clothes. How do I pay Zakat?
A. Every year at the time of paying Zakat you would need to calculate the total selling price for all the goods for sale in your shop. For example, if all the clothes for sale in your shop add up to a total sales value of £2,000, this figure would be added to your other wealth / assets when calculating your Zakat.
Q. I bought a house for the purpose of renting out five years ago. Last year, I decided that I would sell the house. How do I pay Zakat on this?
A. For the four years that you were renting the house out and did not have the intention of selling, you do not pay Zakat on the house. But you would still have to pay Zakat on the rent you earned just like any other wealth you have. In addition, you must pay Zakat after one lunar year from the day you made the intention to sell the house. Zakat is to be paid on the selling price of the house. If you are paying in advance, you would need to estimate this amount. You would need to do the same for every year after in which the house is still for sale.
Q. My Zakat is due in dhul-Qa’dah but I would like to pay in advance (in Ramadan). I have a debt which must be paid in Shawwal (after Ramadan). Can this be deducted from my wealth when calculating Zakat?
A. The general answer would be yes, but we would strongly urge you to consult a scholar about this.
Q. I lent some money out to a friend who informed me that he is able to return the money. Do I have to include this in my wealth when calculating Zakat?
A. Yes, because it is as if he is just storing your money.
Q. Ten years ago I lent some money to a friend who was poor and I did not expect to get the money back. He has now paid me back – is this money liable for Zakat?
A. We need to look at the intention when the money was lent out. If the lender was fairly sure that he was not going to receive it back and he was unable to claim it through the judicial system, then in such cases Zakat is usually not payable. However, there are many variables and hence this question should be referred to a scholar.
Q. I have savings which I shall use to go for Hajj. Should this to be included in my wealth when calculating Zakat?
A. Yes, it must be included.
Q. I have mixed jewellery consisting of gold, silver and precious stones. How do I calculate the value on which Zakat must be paid?
A. The best way for you to do this would be to take the jewellery to a jewellers shop and ask them to value just the gold and silver parts of the jewellery. The valuations they give will be the total amount upon which you have to pay Zakat. Precious stones are not liable for Zakat.
Q. What is the definition of the poor and needy?
A. The Fuqara & the Masakin
Fuqara are those that do not own wealth to the amount of Nisab.
Masakin are those who do not have food for the day; (which is 15-20% of the world).
Q. Can I give Zakat to my family members?
A. Zakat can only be given to people from one of those eight categories given above. If a family member is from one of those categories (i.e., s/he is poor and is unable to provide for herself or himself) – and s/he is not already dependent upon you – then according to the majority of scholars s/he can be given Zakat. But if s/he is already one of your dependents, then you are obliged to spend on them anyway and cannot give them anything from your Zakat.
Q. Can you take Zakat-ul-Fitr before the 27th of Ramadan?
A. Yes you can, according to the Hanafi & Shafi’i Madhhabs.