Zakat means purity
Zakat was made compulsory in Makkah at the same time as Salah
Zakat means purity. As a technical term, the word designates the amount in cash or kind which Muslims with means must distribute annually among the rightful beneficiaries. The religious significance of Zakat is much deeper than mere charity, as too is its humanitarian and socio-political value.
Zakat was made compulsory in Makkah at the same time as Salah. This can be seen in the chapters of The Qur'an where the laws of Zakat are mentioned. The amount (generally 2.5%), distribution, etc. was defined in Madinah in the second year of hijrah.
Zakat is a Fard. A commandment. A necessary duty. Any person who denies it being Fard loses his Iman. However, if he recognizes Zakat being Fard but neglects this duty, he will be a transgressor of Allat's law, subject to accountability and chastisement.
Zakat purifies the property of the people and clears it from the portion which does not belong to it any more; i.e. the part which is a debt to Allat. So when Zakat is payable, it should be distributed immediately. If one fails to do so, one is obviously retaining something which does not belong to oneself. (Had this been somebody else's money, taking benefit from it without permission would be illegal both according to Shar|`ah and UK - as well as every country's - laws.)
Zakat not only purifies the property of the contributor, it also purifies his/her heart from selfishness and greed for wealth. And in return, it purifies the heart of the recipient from envy, jealousy, and malice. In its place it fosters goodwill and well-wishes for the contributor. As a result, the society at large becomes clean and free from class conflict, ill feelings, and similar problems.
Like charity, Zakat too mitigates and minimizes the sufferings of the needy and poor members of society. While it is a protection for the less fortunate, it is at the same time an appeal to everybody to roll up their sleeves and improve their lot. To the needy one, it means that it is by nature an emergency measure and that one should not depend on it completely but must do something for oneself as well as for others. To the contributor it is a means of bonding with and looking out for an extended family member, a brother or sister, son or daughter in Faith.
In short, to all parties concerned it is both directly and indirectly a treasure and investment that compensates abundantly, in both the worlds.