How Do You Work Out Zakat? A Complete Guide for Muslims in the UK
The link between Zakat and Umrah is something that, firstly, I feel we don’t always talk about the meaningful connection. Zakat, is one of the five pillars of Islam and it is compulsory for every Muslim whose wealth meets a certain minimum level. Umrah is a non-mandatory pilgrimage, but one that only becomes realistically attainable when the money aspect of a Muslim’s life is such that they can afford to plan and pay for it. Often, the same Muslim that sits down to work out how much Zakat is due on them is the same Muslim who is now starting to ponder at what point in time they may be able to travel/afford a ticket to Makkah. Knowing how to calculate Zakat correctly is a goal in itself because it is not just charity, but also an obligation. It does however help you to get a clearer view of exactly where you are financially which is directly important for planning an Umrah trip. However, the Zakat is an obligatory action if your wealth has reached Nisab threshold and a complete lunar year has passed. If you have savings consistently beyond that amount, you’re probably good to go looking at umrah packages available from UK companies who can handle your budget accordingly. This step by step guide explains how to calculate Zakat in the clearest, most transparent manner possible with worked examples for UK Muslims wanting to get this right. How to Figure Out Zakat on Your Wealth Finding everything you own that is zakatable wealth and then deducting all immediate debts from those totals before simply applying the 2.5% rate on top of whatever remains (assuming it’s above nisab has been owned for a full lunar year, at minimum). For UK Muslims zakatable wealth can be generally classified as follows: Cash and bank savings It includes instant access accounts, savings accounts, cash in the house or any money that you have sitting in fixed-term deposits and ISAs. Any cash in your possession for a lunar year is zakatable as liquid cash. Investments When dealing with shares, stocks, unit trusts and similar holdings, they are to be zakat from their market value at your Zakat taking place date. Pension funds are a more nuanced topic where academic debate exists, we recommend consulting an expert qualified to give precise Islamic advice on pensions. Business assets stock that is intended for sale shall be zakatable and its value based on current market prices. The equipment, premises and tools used by an entrepreneur in running the business are normally not zakatable. Trade receivables (money owed by customers of your business) become zakatable once it is reasonable to expect payment to be received. Debts owed to you money that people owe you and which you expect to receive on a periodic basis is zakatable. We generally exclude money that is unlikely to be recovered, though scholars disagree on this. Deducting debts from your calculation You have zakatable assets and tax has to be paid at 2.5% of the total amount (after deducting any immediate liabilities,). Existing debt is the debt that you carry on credit cards, short term loans or for bills which are already overdue. In most cases, you should exclude debt that is currently due and able to be offset from long-term obligations, as your mortgage burden (and I think most scholars would argue that the monthly payment obligation can deduct the monthly payment obligation alongside offsetting total loan amount outstanding.) How Do I Calculate Zakat on Gold? It is also still the one of the most commonly misunderstood areas of Zakat calculation for UK Muslims as many households own gold jewellery instead of bars or coins, which has been subject to conflicting scholarly opinions over whether it is zakatable. The Hanafi position According to, gold jewellery with nearly all South Asian Muslims in the UK, is zakatable regardless of whether they wear it currently or store it. You are obligated to pay Zakat on your gold jewellery if it meets or adds up to the Nisab threshold. To calculate Zakat on gold jewellery: The first step is to calculate your gold weight in grams. A jeweler can do this for you if you do not have an exact scale. Be mindful about the karat of gold. In all cases, 24k is pure gold, 22k is 91.7% gold and 18k is 75% gold. Now multiply the weight into the purity percentage to extract the pure gold content. Multiply the answer by the current price of gold per gram in the market for calculating its value. I.E: 50 grams of 22k gold jewellery contains 45.85 grams of solid gold. The value of that jewellery you have is approx £2,980 and the gold price is about £65 a gram (find the current rate on your Zakat anniversary date). When you are calculating your total zakatable assets, add that amount in with the other zakatable assets. Using gold prices from your actual Zakat anniversary date Gold can swing week to week considerably (and using antiquated pricing is incorrect). In GBP, UK gold prices are available every day from, for example, the London Bullion Market Association (LBMA) published by a simple search on your chosen calculation date. How Is Zakat Calculated? Once you have identified your zakatable assets, the Zakat calculation is a simple process. Step 1: Establish your Nisab threshold Nisab is the minimal amount of wealth an individual is eligible for Zakat assessment. Either 87.48 grams of gold, or the equivalent value (612.36 grams) of silver defines it. All that you need is to get over one of those thresholds. As a point of Guide (the gold Nisab is between £5,000 to £6,000 in GBP depending on the price of gold and the silver Nisab is about £416 to £550). The silver Nisab is generally utilized among Hanafi Muslims, the threshold for eligibility is lower, so more people are eligible, resulting in more Sadaqah being directed to those who need it. Other madhabs utilize
