Zakat – what is and how to calculate percentage?

What is Zakat?

Zakat is a pillar of Islam.  Springing from the principle that all things belong to God, it is the practice of giving away a portion of your own wealth – an important act of worship.

Through Zakat, millions of pounds are distributed in the UK every year.  It is quite different to tax – Zakat is used for specific charitable purposes, nurturing the poor and sick.

As one of the five pillars of faith, Zakat is an obligation for every adult Muslim.  As soon as you reach the wealth threshold, you must begin paying Zakat – calculated on the same day each year henceforth.  So far it’s simple.

Now the wealth threshold, or Nisab, is a little more complicated.  The Prophet Mohammed set it at a rate that’s now equal to about 87.48g of gold (note that some sources differ by a couple of grams!) and 612.36g of silver.

So at today’s gold and silver rates, you must pay Zakat if you own:
> Gold worth £2727.45 or more (in total)
>  Silver worth £248.01 or more (in total).

But what if your assets are mixed – some gold, some silver, some savings?   Well, you can apply these thresholds, using the current cash value, to work out whether your total assets take you above the Nisab.  Many people prefer to use the lower (silver) threshold… to be on the safe side.

Note that you should use the value of gold and silver on the day you pay your Zakat.  If you’re on the brink then you’ll have to check on the date.

How much is Zakat?

Zakat is 2.4% or 2.5% of your assets.  It isn’t related to your income, which you receive and spend during the year.  It doesn’t include your home or car unless you’ve decided to sell them, which makes them tradeable assets (seek advice if that’s the case).  It DOES include your savings, stocks, watches, and jewellery.  (It also includes any money that you own but have loaned to someone else.)

How much is Zakat for you personally?  You will need to value your possessions (see below) and apply the 2.5% to work this out.

How to calculate Zakat on gold

You calculate Zakat on the day it is due for you personally.  For most people it’s the anniversary of accumulating wealth over the threshold.  To give an example, if you didn’t own many assets (so you were below the threshold) as an unmarried woman, but your assets became worth more than the Nisab on your wedding day, that’s the day you would pay Zakat each year.

Zakat is an individual tax paid by every rational, adult Muslim.  So a married couple – and any of their children who have passed puberty – should calculate their Zakat separately, dividing shared assets.

First, round up your Zakatable gold and silver.  These include your gold wedding ring, gold watches, and silver jewellery (as well as investment gold or silver, if you have any).  Platinum, palladium and titanium jewellery is not Zakatable.

You will need to first calculate a total weight for your gold and silver.  You can weigh any pieces that do not have stones (like diamonds – because stones are not Zakatable).  If you have a piece of jewellery containing contrast metals or diamonds it is best to have this weighed by a jeweller, who can estimate the gold or silver content for you.

Using the weight, you can work out the current value of your gold and silver.  You can obtain an accurate figure for today’s gold and silver rates – and make the calculation online – from the National Zakat Foundation.

If you aren’t confident about doing this yourself, it is simple to bring your jewellery to a trusted family jeweller and ask for a valuation for the purpose of Zakat.

When you have a final figure, you can give your Zakat as you wish – providing it fits one of the categories stipulated in the Qu’ran.  There are UK institutions that distribute Zakat, but you can equally choose a charity that you feel passionately about.  Your Zakat must be given to benefit one of the following:

  • The poor;
  • The needy;
  • Those who distribute Zakat;
  • The work of winning hearts (ie, reaching out to new Muslims);
  • Slaves;
  • Debtors;
  • The cause of Allah;
  • The wayfarer (emergency assistance).

 PureJewels offers jewellery valuations for the purpose of Zakat

When looking for a jeweller to provide a valuation for Zakat, you will want to choose a trusted source.  PureJewels is a three-generation family jeweller on Green Street in London.  We have a loyal family of customers who visit the store for their special occasions, jewellery repairs, and valuations.  We’d be delighted to welcome you to the store and honoured to assist you in the very private and delicate matter of calculating your Zakat.

Childrens jewellery bangles rings and gold bracelets

Giving children gold

Investing in gold is widely approved.  Gold is accepted at central banks all over the world; it has been collected and preserved by humans for thousands of years.  It is universal and timeless – an exceptionally good, long-term investment.

And if you have grandchildren or children, gold is a good ‘insurance policy’ that they can keep and cash if really they need to.  (The fact that you can’t walk into a shop and instantly spend a gold chain adds to the appeal if you’re a parent!)

If your grandchildren or children will inherit your assets, they will be required to pay Inheritance Tax (currently 40%) on anything over £325,000 (figures correct at today’s date).

However, you are able to give tax-free gold and cash gifts of up to £3000 per year.  And if you are hoping to live for more than seven years, you can make gifts worth more – tax-free. (When you die, your “estate” includes any gifts that you gave during the previous seven years.)

While we are not experts on inheritance law, it is clear that it makes sense to begin dispersing your wealth, and give your grandchildren or children gold in small amounts, as soon as you are able.

Should you buy children’s jewellery?

There are advantages as well as disadvantages involved when you buy children’s jewellery.   Children’s gold bracelets remain a solid and much-loved tradition in many cultures.  In the Indian tradition, a gold baby bracelet is believed to ward off evil spirits for a newborn.  A toddler or baby wearing a gold bangle is a beautiful sight – and it lets parents or grandparents lavish their precious child with the adornment that they deserve.  A piece of gold jewellery can become beloved by the child as they grow up a little, too; you may remember a gold bracelet that you adored as a child.  All very good reasons why buying children jewellery is still extremely popular.

But, even if they absolutely love it, most children don’t look after jewellery quite as well as adults.  For example, your 8-year-old could very easily lose her 22ct gold bracelet, which she insisted on wearing, when playing with friends (as was this writer’s experience).  In this case, a gold-plated bracelet might have been more suitable; there is definitely an argument to be made for keeping the children’s jewellery in a vault.

IF children’s jewellery doesn’t appeal to you, or you’re worried about the security of giving a gold bracelet to a 5-year-old, then opt for a gold bar or Silver Tola instead – the child’s parents can safely store these, and you (and others) can add to the collection on every birthday.  A wonderful way to build up a bank of savings for the children to have when they turn of age.

 

Our collection of children’s gold jewellery

Let’s start with our beautiful collection of children’s gold bangles and bracelets.  We make them in the traditional Indian manner, using a 22ct gold wire threaded with beads of solid 22ct gold and contrasting jet black (following tradition).  These are lovely pieces of jewellery for the baby to wear at a special occasion, and keep safely stored away – maybe for their own baby one day.  You’ll note that we specify the weight for our children’s gold bracelets, so you can be assured of its future value.

If you want to be the person who gives baby their first bracelet, ours are charmingly authentic and beautifully made.  The classic Black and Gold Children’s Bracelet is threaded on a wire for security and is an enduring bestseller at PureJewels.

For contemporary tastes, we have introduced some new designs recently.  Our personalised Rose Gold baby bracelet is incredibly popular – with a warm tone (introduced by a touch of copper in the gold alloy), it’s a really individual piece of jewellery.  When baby grows up, she could have this baby bracelet turned into a personalised gold necklace to wear every day.

Are you looking for a children’s gold necklace or ring?
We don’t keep our entire stock of children’s jewellery listed online at PureJewels.  If you want to buy a children’s gold necklace, contact the store; our solid gold chains can be adapted to the right length (or you can probably get away with a 16” chain for an older child).  Use Live Chat to reach our in-store advisors, who can make suggestions and send you snaps of the children’s gold necklaces that are currently in store.

We are also able to design and produce jewellery on commission.  If you want a special children’s necklace, from toddler to teen, named or set with diamonds, then come into the store for a chat.  Our design team is ready to help materialise your ideas.