Zakat is due on business wealth just as it is on personal savings. For most trading businesses, the calculation is based on assets that are held for sale or can be turned into cash, less the debts that must be paid in the near term.
Assets that are zakatable
- Cash and bank balances
- Trade receivables that you expect to collect
- Inventory: raw materials, work in progress and finished goods, valued at current market value
- Investments held for trading
Assets that are not zakatable
Fixed assets used to run the business, such as premises, machinery, equipment and vehicles, are not subject to Zakat, because they are not held for sale.
What you can deduct
Current liabilities, meaning amounts due within the coming year, can be deducted: payments owed to suppliers, short-term finance instalments due, tax and wages due.
A worked example
| Cash and bank | £40,000 |
| Receivables expected to be collected | £25,000 |
| Inventory at market value | £60,000 |
| Less: current liabilities | −£35,000 |
| Net zakatable assets | £90,000 |
| Zakat at 2.5% (lunar year) | £2,250 |
If the business uses the Gregorian financial year instead of the lunar year, the AAOIFI Sharia standard on Zakat applies a rate of 2.577% to reflect the longer year. In the example above, that gives £2,319.30.
Who pays?
Zakat on a company's wealth is ultimately due from its owners. A company can pay it on their behalf where its articles, a shareholder resolution or the owners' authorisation allows it; otherwise each shareholder pays Zakat on their own share.
Try the calculator
Our free Zakat calculator has a business mode that follows this method. For companies with complex assets, long-term investments or several shareholders, we can prepare a written Zakat calculation.