Zakat on Cash & Savings

Zakat is due on all cash and cash-equivalent holdings you have owned above the nisab threshold for a complete lunar year. This includes money in current accounts, savings accounts, Cash ISAs, premium bonds, cash at home, and the sterling equivalent of any foreign currency. The rate is 2.5% of your total net cash position.

Current Accounts and Savings

All balances in current and savings accounts are zakatable. Include the full balance as it stands on your calculation date. There is no minimum holding period for individual deposits — if the money is in your account on your hawl anniversary, it is included.

Notice deposits and fixed-term savings are also included if the money is technically yours and reachable (even if there is a penalty for early withdrawal). You own the underlying funds even if access is slightly restricted.

Cash ISAs

The Cash ISA tax exemption — where interest is not taxed — has no bearing on zakat. Zakat is a religious obligation, not a tax, and it applies to the full balance of any Cash ISA you hold. Include the full balance on your calculation date.

Premium Bonds

Premium bonds are a National Savings & Investments product where your capital is secure and you receive tax-free prizes instead of interest. For zakat purposes, the full value of premium bonds you hold is zakatable — not just the prizes you have won.

The prize element (the "interest equivalent") is subject to a separate discussion — many scholars would class the prizes as a form of interest (riba) and recommend giving them to charity rather than keeping them. The capital, however, is clearly yours and is zakatable.

Cash at Home

Physical cash — notes and coins kept at home, in a safe, or in a wallet — is zakatable. Do not forget to include it. Many people underestimate how much physical cash they hold across different locations.

Foreign Currency

Any foreign currency you hold — whether in a foreign bank account, a currency account in the UK, or physical notes — is zakatable. Convert it to pounds sterling at the spot exchange rate on your calculation date, then include it in your total cash figure.

Common examples for UK Muslims: savings held in Pakistani rupees, Bangladeshi taka, Indian rupees, UAE dirhams, or Saudi riyals. Include all of these at their GBP equivalent.

Interest (Riba)

Most Muslims in the UK hold conventional bank accounts that pay interest (riba), even if small. Islamic guidance on this situation varies, but the practical approach for zakat purposes is:

• Calculate zakat on the principal balance only — the amount you deposited or saved
• Any interest that has accrued is not considered your clean wealth and should ideally be given to charity (not kept for personal benefit)
• Do not subtract the interest from your balance before calculating zakat — the principal is fully zakatable

For most savings accounts in the UK, the interest amount is small relative to the principal, and the practical simplification is to use the full balance shown in your account on your calculation date.

One Total — Nisab Applies to Everything Combined

Cash is not checked against the nisab separately. All your zakatable assets — cash, gold, silver, investments — are added together into a single net wealth figure, and the nisab threshold is applied to that total. This means even a small amount of cash can push you above the nisab when combined with gold jewellery or savings in other accounts.

The formula is: