How Zakatable Wealth Works

Zakatable wealth is surplus wealth that can grow. Zakatable wealth includes: cash (in hand or in the bank), savings accounts, gold, silver, business inventory, shares and stocks, investment funds, cryptocurrency, and money owed to you that you expect to receive. The principle is simple: if the wealth is liquid (can be converted to cash) or is meant for trade, it is zakatable. Islam focuses on wealth that has the potential to grow or that is held as surplus. This ensures Zakat is paid on assets that represent financial security, not basic needs.

Personal belongings and essentials are exempt. You do not pay Zakat on: your home (unless you are selling it for profit), your car, furniture, clothing, food, or tools you need for work. These are considered personal use items, not wealth. If you own property that you live in, it is exempt. If you own property that you rent out, the property itself is exempt, but the rental income you save is zakatable. If you bought property to sell for profit, the full value is zakatable because it is treated as business inventory.

Zakat is calculated at 2.5% of qualifying wealth. Once you know your total zakatable wealth, you multiply it by 0.025 (or 2.5%) to find what is due. For example, if you own £10,000 in cash and savings, your Zakat is £10,000 × 0.025 = £250. This rate applies to most wealth. Some assets, like crops and livestock, have different rates, but the vast majority of Muslims focus on the 2.5% rule for cash, gold, and investments. The 2.5% rate is based on Islamic tradition. It balances the obligation to give with the need to allow people to keep most of their wealth for their own use. tip