Zakat on business assets is calculated at 2.5% of the net zakatable business wealth: stock in trade at sale value, trade debtors that are likely recoverable, and business cash — minus business creditors due within the year. Fixed assets such as equipment and property used in the business are not zakatable.
Key facts
- Stock-in-trade: zakatable at expected sale value (not cost price)
- Trade debtors: include amounts likely to be recovered; exclude doubtful debts
- Business cash: include all business bank balances
- Fixed assets (equipment, machinery, vehicles, property): NOT zakatable
- Business creditors: deduct amounts owed to suppliers within the current year
- Rate: 2.5% on net business zakatable wealth (added to personal wealth total)
Stock-in-Trade
Goods held for sale — stock-in-trade — are zakatable at their expected market (sale) value, not their cost price. If you have inventory worth £50,000 at cost that you expect to sell for £70,000, the zakatable value is £70,000.
This applies to physical goods, finished products, raw materials intended for resale, and work-in-progress. It does not apply to capital equipment used in producing those goods.
Trade Debtors
Money owed to your business by customers is zakatable if it is likely to be recovered. Doubtful debts — amounts where recovery is uncertain — are excluded from the calculation but should be noted in your records. If a doubtful debt is eventually recovered, zakat becomes due on it at that point.
Fixed Assets
Equipment, machinery, computers, vehicles, and commercial property used in running the business are not zakatable. These are means of production, not liquid wealth. Only assets that are part of the trading cycle — and therefore zakatable — are stock, debtors, and cash.
Business Creditors
Amounts your business owes to suppliers (trade creditors) that are due within the current year are deducted from the zakatable total. Only immediate business liabilities are deductible — not long-term business loans or deferred payments.
business_zakatable = stock_at_sale_value + trade_debtors + business_cash
net_business = business_zakatable − business_creditors
net_business is added to personal zakatable wealth for the nisab check