What is Zakat?
Zakat literally translates as "purity". In terms of context, Zakat refers to an obligation upon every sane and mature Muslim whom possesses the Nisab.
How much and When?
Zakat is only 2.5% of the total of one's wealth. This includes, cash savings, cash in hand, gold and silver, stocks and shares, pensions, ISAs, crypto assets and business assets.
Please note, that the valuation of how much zakatable assets one has in shares, pensions, ISAs etc. will vary on the type of schemes. Therefore it is important that all the necessary facts are established before calculating one's Zakat.
2.5% equals 1/40 (one fourtieth) and therefore when calculating how much Zakat is due, all you need to do; is divide the final figure of one's zakatable assets by 40!
Anyone who is a Muslim, adult (has reached puberty) and is sane, is expected to give Zakat if they have the minimum amount of wealth, which is known as the Nisab.
It is also important to remember that Zakat is due on 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 (if you don't know the exact date you can estimate). Once you've paid your Zakat the first time, this then becomes your Zakat anniversary.
How do I calculate it??
There are a few simple steps to working out your Zakat:
Nisab is a threshold that is used to determine whether or not one has to pay Zakat. After one has calculated all their zakatable wealth, they will need to see if this wealth is higher than the Nisab.
The Nisab was set by the Prophet Muhammad (PBUH) at a rate equivalent to 87.48 grams of gold and 612.36 grams of silver.
If you only have gold as an asset, then the Nisab measure for gold must be used. If, however, you have a mixture of assets, then the Nisab level for silver should be used.
Using silver is more beneficial for the recipients of Zakat as a larger proportion of the Muslim population will have the silver measure in comparison to the gold measure.
How much can I deduct?
You can take away one year's worth of debt repayments from your total wealth, but ideally this should only be done if paying Zakat is likely to stop you from being able to afford the repayments. If you're likely to be able to repay the debt and it will not be affected by paying Zakat, the debt shouldn't be taken off.
What can you take off?
What can't you take off?