Zakat is one of the most important obligations in Islam, and one of the most misunderstood. As the third pillar of our faith, it’s not simply a charitable donation or a good deed. It’s a divine duty, rooted in purification, growth, and social equity.
If you’re unsure how to calculate it, who it’s for, or where to give it, this guide will walk you through the essentials in a clear, accurate and practical way.
What is Zakat?
The word “Zakat” comes from the Arabic root meaning “to purify” or “to grow.” When you pay Zakat, you purify your wealth from greed and selfishness, and in turn, your remaining wealth is blessed and protected by Allah (SWT).
Zakat is obligatory for every Muslim who:
- Is an adult of sound mind
- Has owned wealth above the nisab threshold
- For at least one full lunar (Hijri) year
The standard rate of Zakat is 2.5% of your qualifying wealth. This is not a random number; it reflects a divine command designed to circulate wealth, support the vulnerable, and uphold justice.
Who Is Eligible to Receive Zakat?
Zakat must be given to one or more of the eight categories mentioned in the Qur’an (Surah At-Tawbah, 9:60):
- The poor (al-fuqara)
- The needy (al-masakin)
- Those employed to collect Zakat
- Those whose hearts are to be reconciled
- To free those in bondage
- Those in debt
- In the cause of Allah
- The stranded traveler
It is not valid to use Zakat for building mosques, schools, or general infrastructure, and it should not be given to organisations that do not distribute it directly to eligible individuals. These are considered Sadaqah Jariyah (ongoing charity), not Zakat-eligible causes.
What Wealth Is Zakatable?
Zakat is not owed on everything you own, but only on wealth that is considered productive or growing in nature. This includes assets that are either accumulating, capable of generating profit, or held for trade. The purpose is to purify surplus wealth and ensure it benefits those most in need.
If you’ve owned zakatable assets for one full lunar year (hawl) and their total value meets or exceeds the nisab threshold, you’re obligated to give 2.5% of that wealth as Zakat.
Here are the most common categories:
- Cash: In bank accounts or at home
- Gold and silver: Including jewellery (depending on your madhhab)
- Business stock: Retail items or goods intended for sale
- Investments: Stocks, shares, and pensions (zakatable portion only)
- Money owed to you: If realistically repayable
Zakat does not apply to:
- Your primary residence
- Personal items like furniture, clothes, or your car for personal use
- Non-income generating property (unless it’s bought/sold for profit)
It’s important to check with a qualified scholar or follow guidance from a reliable zakat organisation if your finances include more complex assets like pensions, crypto, or mixed investments.
Step-by-Step: How to Give Zakat Properly
To calculate how much Zakat you give (a simple 2.5% case), you’ll want to follow these steps:
- Pick a Zakat Date. Choose one date each year (many choose a day in Ramadan) and stick to it annually.
- List All Zakatable Assets. You will want to add up the following:
- Cash in bank accounts and physical cash
- Value of gold/silver (current market rate)
- Business inventory (sale value)
- Receivables (debts you expect to be paid)
- Zakatable portion of your investments (check with a calculator or scholar)
- Subtract Immediate Debts. Only deduct bills and debts due right now (not long-term mortgage balances).
- Check Against Nisab. If your net wealth is above the nisab and you’ve held it for 1 lunar year, Zakat is due. Nisab value changes based on silver or gold prices.
- Calculate 2.5%. Multiply your total zakatable wealth by 0.025.
Here is an example of how to calculate Zakat correctly:
Let’s say your zakatable assets total £11,000 and you owe £500 in bills. Your net wealth is £10,500.
Zakat = £10,500 × 0.025 = £262.50
You can round up slightly out of caution.
Tools to Calculate Zakat
Calculating Zakat can feel complicated. That’s why there are platforms like MyTenNights and MyFridays to help you. With our platforms, you can:
- Calculate your Zakat with ease (see our Zakat calculator)
- Split donations across eligible causes
- Schedule giving automatically (e.g. over the last 10 nights of Ramadan)
This makes fulfilling your obligation simpler, especially when you want to give strategically and ensure your Zakat reaches those most in need.
Zakat Donation Tips
Which assets are subject to zakat?
Cash, gold, silver, business inventory, investments, and debts owed to you.
How do I determine the nisab this year?
Check with a reliable charity or Islamic finance body. Many post the current nisab monthly based on silver/gold.
How do I calculate zakat on savings or investments?
Apply 2.5% to your savings. For investments, it depends on the asset type. Use a calculator or consult a scholar.
What about business stock?
Calculate the sale value of your stock (not the purchase price), and include it in your zakatable assets.
Can I give Zakat to a family member?
Yes, if they are eligible and in need (e.g. poor/indebted).
Zakat is a form of worship. It purifies your wealth, uplifts others, and strengthens your connection to Allah. Understanding how to calculate it correctly ensures you fulfil a major pillar of your faith with confidence and sincerity.
Whether you’re giving during Ramadan or at another time of year, using tools like MyTenNights can help you automate and organise your giving, so your Zakat reaches the right hands, without delay, confusion, or stress.