Is zakat 2.5% of income or savings?

Where 2.5% comes from

Zakat is one of the five pillars of Islam, mentioned again and again next to prayer:

The rate comes from the Sunnah. In the letter Abu Bakr wrote for zakat collectors, based on the Prophet's ﷺ instructions, the zakat on silver money is "a quarter of a tenth," which is 2.5% (Sahih al-Bukhari 1454). Scholars apply the same rate to gold, cash, bank balances and trade goods.

Why savings and not income

Zakat is a charge on wealth that sits with you and has the chance to grow, not a tax on what you earn. So:

• Your monthly pay is not taxed when it arrives.
• What you spend during the year is gone and owes nothing.
• What's left, if it's above nisab and you've held nisab for a year, is charged at 2.5%.

Example: you earn £30,000 a year and spend most of it. On your zakat date you hold £6,000 in savings (above nisab). You pay 2.5% of £6,000, which is £150, not 2.5% of £30,000. See Do I pay zakat on my savings account?

A modern minority view on salaries

Some modern scholars, notably Yusuf al-Qaradawi, compared salaries to crops and suggested paying 2.5% when income is received. Most scholars and the four classical schools don't require this, since money needs a full year. Still, some people choose to set aside 2.5% of each paycheck as a habit and settle up on their zakat date. That's fine as long as you check the final figure. See Can I pay zakat monthly?

Not everything is 2.5%

Other kinds of wealth have their own rates: crops are 5–10% at harvest, livestock has fixed numbers of animals, and found treasure is 20%. For everyday converts with a job and a bank account, though, 2.5% of savings is the rule you'll use. See How do I calculate my zakat?