Is staking crypto halal?

The United Kingdom is going through a turbulent financial and economic situation. Coming out of the pandemic, navigating the financial landscape and the economy has resulted in the highest inflation we have seen in decades, alongside stagnant wages and rises in energy bills.

The cost of everything is increasing and it is ordinary people who are struggling. From the National Health Service, to the private sector, and across every community we are all feeling the pinch.

Whilst we expect the government to ensure there is sufficient funding and investment in communities, families, and industries, what is clear is that we all need to be taking steps to minimise the risk of financial losses.

Whilst the government seems more focused on climate action, decarbonisation, and reducing emissions than effective financial planning, as individuals we need to take responsibility for our own actions.

Now is the time for us to be examining out own finances and expenditure.

As we move forward into 2024 and beyond there are some key steps you can take to make sure you are in the best financial position you can be.

Get Informed

Before we move on to the steps we can take to improve our finances, we need to consider our own financial literacy.

As individuals and communities we need to prioritise learning about and understanding finance. Prepare for the future by taking the time to learn about the key principles around money and money management. Learn how interest works, and why it is deemed to be haram in Islam.

As consumers, we need to scrutinise and assess our impact on our finances and understand how we spend and save.

The more information you have the better. The worst thing you can do is bury your head in the sand.

Start by getting details of all your bank accounts, savings, direct debits and debts. Understand your incomings and outgoings and make sure you are living within your means.

One of the key principles of Islam is to live within your means. This encourages people to be mindful of how they consume and spend, and to avoid extravagance.

There are also stringent obligations to ensure that you stay away from riba (interest) and haram spending. You cannot do this properly unless you understand your finances fully.

Knowing your finances means you can avoid haram practices. Also, in order to plan effectively for the future you need to understand how your money is saved, whether it accrues interest, and how much you can save each month.

There is ample information and advice on this website to guide you along the way. In addition, technology is so advanced that these days we can check all our accounts and finances using our mobile phones. As a result, you can keep a close eye on your finances.

Focus On Sustainable And Responsible Consumption And Investing

Focusing on sustainable and responsible consumption is key for everyone, but especially Muslims who want to live in a Sharia compliant way. Islam encourages ethical and socially responsible behaviour in every area of life.

We are required to make a commitment to being sustainable and responsible. Over-consumption goes against Islamic finance principles.

Some of the best ways of achieving a more halal and sustainable level of consumption include:

• The concept of amanah
  • Islam considers money and wealth to be an amanah from Allah. What this means is that Muslims act as stewards of the wealth and will be held accountable for how they use and spend it. Sharia rules guide us to use the wealth in morally and ethically sound ways, and Islamic finance provides us with the structure in which to do this. The construction of Islamic finance principles helps us to make sure we operate within Islamic principles when it comes to our finances. In personal terms, it means that we should be more considered and careful with our finances, avoiding excessive spending, and always taking care to mind our money.

• Avoiding waste
  • Any kind of waste should be avoided, and this includes wasteful purchases and spending. Responsible consumption aligns with the principle of stewardship. Keep an analysis of what you spend on and how you spend and you will be able to identify and report on poor spending and then eliminate it.

• Avoiding haram but invest wisely
  • As Islam prohibits actions that cause harm to others, we need to be mindful of any spending that is deemed to be haram. This includes investing in industries that are haram such as gambling, alcohol and porn industries. Instead, we should look at halal investment options and services.
  • There is a huge social impact to investing in haram industries. Be mindful of where your sums are stored and being invested. The corporate world may be focused on profits, but there are socially responsible and Sharia compliant industries you can invest in. There is also increased regulation and protective policy of most investment options across the United Kingdom which means you can be assured that your money will be safe.

Think Long Term

As mentioned above, try and think long-term. When it comes to your finances, whilst it may seem like you are living from one pay day to the next, there are some small steps you can take to plan for the future. As the old saying goes - fail to prepare, prepare to fail.Planning ahead can relieve the pressure you face tomorrow. The market is fluctuating and temperamental now but it will not always be like this.

Planning ahead builds financial stability and means you can cope with emergencies when they arise. Think of the scenario of when you are much older and unable to work as hard.

Living from one pay day to the next can result in more and more people turning to debt and credit to cover their everyday expenses. Long-term financial planning helps break the cycle of debt. The UK has an ageing population, so it is even more important that we plan ahead and make the right financial decision for our future.

Here are some steps you can take to effectively plan ahead:

1. Set some financial goals: these do not have to be complicated or difficult. Instead, they should be realistic. For example, one goal could be to start saving for a home.
2. Create a budget: once you have a goal, go through all your financial data including incomings and outgoings. Try and track your spending to see where you can cut back and what you can do cheaper. This will help you identify any spare funds for saving. Even £5 a month will help.
3. Have an emergency fund: to stop yourself from falling into debt, try your very best to have an emergency fund.
4. Save and invest regularly: consistent investing, even with the tiniest amounts, can accumulate over time. When dealing with the increasing cost of living, we need to have some money set aside for emergencies.
5. Ditch the debt: overspending is one of the fastest ways to end up in debt. If you are in debt there is help and support out there, so reach out and see if you can reduce your debt and lower your spending.

For Muslims, financial literacy means they can plan and prepare responsibly. It also means they can account for their zakat payments which are obligatory.

Embrace Islamic Finance Principles

Muslims are obliged to follow the Sharia rules relating to finance. For Muslims, true success comes with pleasing Allah.

Embracing Islamic finance principles is extremely important for those wanting to be compliant with Islamic rules relating to financial dealings, but also for those wanting to live and manage their money responsibly.

Islamic finance prohibits any form of interest - that includes payment of interest or receipt of it. The whole idea behind avoiding interest is that this creates a fairer society and does not burden one group more than others. Interest is seen as being rooted in unethical and irresponsible economics.

Islamic finance is based on social justice and fairness. Islam places great emphasis on ethical behaviour, through choice. This means there is an obligation on Muslims to treat all their social and economic dealings with care.

Another key concept from Islamic finance is the idea of profit and loss sharing. Sharia rules encourage profit and loss sharing arrangements. This is to ensure that both parties are treated fairly.

For Muslims looking to save costs and stay away from debt, focusing on Islamic finance rules means they can operate Islamically but also in a way that maximises their money and makes it go further.

Establish Zakat And Sadaqa

Establishing zakat and sadaqa are critically important in Islam. Zakat is an obligation upon all Muslims, whilst sadaqa is voluntary but hugely encouraged.

In order to pay your zakat you need to understand your finances fully. Calculating and paying zakat on an annual basis is essential for Muslims.

Working out your zakat requires an important wealth assessment and analysis calculation. What it means is that through the whole year you are more conscious of your spending and you are making plans for the payment of zakat.

Zakat encourages people to be aware of their financial assets and situation. This prevents the problem of not knowing how much zakat you need to pay.

Understanding the importance of zakat and sadaqa actually encourages savings throughout the year. It also helps people to budget and plan accordingly. Also, by paying zakat people are able to understand the importance of distinguishing between needs and wants in their own lives.

Sadaqa, whilst voluntary, generates a feeling of generosity, compassion and empathy. By willingly sharing our wealth with others it means we are attuned to the needs of others and can budget accordingly.

Stay Away From Debt And Interest

Now is the time to really understand and analyse your spending habits. Make more informed choices about where to spend and save your money. This encourages a more balanced and moderate lifestyle.

Managing your debt is always a good risk management strategy. If you have a credit card then try and stop using it and clear any debt you owe. Credit card debt carries high interest rates and is deemed haram.

Staying away from debt is one of the best financial decisions you can make for yourself. Debt can lead to financial strain, and negatively impacted credit scores. It also means you have overall less disposable income from jobs, and this limits you being able to set goals, save and invest for the future. This will give you greater peace of mind when preparing for the future.

Qardus Ltd do not provide financial or investment advice. It is recommended that you seek your own independent advice from a qualified professional.

For Muslim investors in the UK, an ISA is best understood as a tax wrapper. The Sharia question depends on the savings or investments placed inside it. This means the wrapper can help protect eligible returns from tax, but it does not decide whether the money inside it is Sharia-compliant.

That depends on what the ISA holds, how the return is generated, and whether the underlying account, fund, stock, sukuk, or investment structure follows Islamic finance principles. A Cash ISA that pays conventional interest raises a different issue from a Stocks and Shares ISA invested in Sharia-screened assets.

For serious investors, the better question is how an ISA fits into a wider halal wealth plan. Used properly, it can support tax-efficient saving, long-term investing, and portfolio structure. But relying on the wrapper alone may lead to an inaccurate assumption of Sharia compliance if the underlying assets remain unverified. 

Are ISAs Halal?

Yes, ISAs can be halal, but they are not automatically Sharia-compliant.

The reason is simple - an ISA is only a tax wrapper. It decides how eligible savings or investment returns are treated for tax purposes in the UK. It does not determine whether the money inside the account is halal.

The Sharia question depends on what the ISA actually holds. This could be cash, investment funds, individual shares, sukuk, or another investment arrangement. Each one needs to be assessed based on how the return is generated and what the money is exposed to.

A conventional Cash ISA that pays interest would be problematic for many Muslim investors because the return comes from riba. A Sharia-compliant Cash ISA works differently. Instead of paying interest, it may use an expected profit model, where the provider aims to generate profit through activities structured around Islamic finance principles.

A Stocks and Shares ISA can also be halal, provided the investments inside it are Sharia-compliant. That usually means avoiding prohibited sectors, checking debt and interest exposure, and using funds or assets that are screened according to recognised Sharia standards.

The Key Distinction: Wrapper vs Underlying Asset

The most important distinction with halal ISAs is the difference between the wrapper and the underlying asset.

The ISA wrapper is the tax structure. It determines whether eligible returns can be received without UK income tax or capital gains tax. It does not, by itself, define whether the investment is halal.

The next layer is the account or asset inside the ISA. This may be a cash account, a fund, individual shares, sukuk, or another eligible investment. This is where the Sharia assessment begins, because the money is now exposed to a specific product, company, contract, or return mechanism.

Then comes the return source. Is the return generated through interest, profit, dividends, rent, trade, or capital growth? The distinction is vital for Muslim investors because the same ISA wrapper can house multiple products with vastly different revenue-generation models. 

Screening is another important layer. A fund may describe itself as Islamic, ethical, or responsible, but investors still need to understand who verifies Sharia compliance, how often the portfolio is reviewed, what standards are being used, and how non-compliant income is handled. 

Purification may also matter, especially with equity investments. If a small amount of non-compliant income is identified, investors need to understand whether purification is calculated, disclosed, and handled clearly.

Tax efficiency is separate from Sharia compliance, as the wrapper strictly dictates the tax treatment of returns rather than the permissibility of the underlying assets. 

Types of Halal ISAs in the UK

There are several types of ISAs available in the UK, but the same principle applies to all of them. The ISA wrapper itself remains a neutral administrative tool. The critical factors involve the specific methods used to hold, deploy, and distribute capital back to the investor.

Halal Cash ISA

A halal Cash ISA is usually used for liquidity and lower-risk savings. It may suit investors who want to keep money accessible, preserve capital, or set aside funds for a near-term goal.

The main issue with conventional Cash ISAs is that they pay interest. For many Muslim investors, that makes them unsuitable because the return is based on riba. Islamic Cash ISAs usually work differently. Instead of paying interest, the provider offers an expected profit rate, with returns generated through Sharia-compliant activity.

This makes a halal Cash ISA more useful for capital preservation than long-term wealth growth.

Halal Stocks and Shares ISA

A halal Stocks and Shares ISA is more relevant for investors who want long-term, tax-efficient growth. Depending on the provider or platform, it may hold Sharia-screened funds, ETFs, individual equities, sukuk, or other eligible investments.

The important point is that a Stocks and Shares ISA is not halal just because it avoids cash interest. The investments inside still need to be screened properly. This includes checking the sectors involved, the company’s financial ratios, debt exposure, non-compliant income, and whether purification is required.

For serious investors, this is often the more important ISA to understand because it can play a larger role in portfolio growth over time.

IFISA / Innovative Finance ISA

An Innovative Finance ISA, or IFISA, can hold certain alternative finance or peer-to-peer style investments. The wrapper itself is neutral, just like with other ISAs.

The issue is the underlying contract. Many IFISA products are based on interest-bearing lending, which would be problematic from a Sharia perspective. Others may involve asset-backed or business finance structures, but that does not automatically make them halal.

A Sharia-compliant IFISA needs to be assessed by looking at how the return is generated, what contract is used, and whether the investment has proper Sharia oversight.

Lifetime ISA and Junior ISA

Lifetime ISAs and Junior ISAs follow the same basic rule. The wrapper does not decide Sharia compliance; the underlying cash account, fund, or investment does.

A Lifetime ISA may be used for a first home or later-life savings, while a Junior ISA may be used for a child’s future. In both cases, Muslim investors still need to check what the money is actually invested in.

How Should Serious Muslim Investors Use ISAs? 

For serious Muslim investors, an ISA should have a clear job. It should not be chosen simply because it is available, tax-efficient, or labelled as Islamic. 

The right ISA depends on what the investor wants the money to do.

A halal Cash ISA may be suitable for short-term reserves, emergency savings, or money that needs to remain relatively accessible. It is usually more about preserving capital than building long-term wealth.

A halal Stocks and Shares ISA may be more suitable for long-term growth. This can make sense for investors who want exposure to Sharia-screened equities, funds, ETFs, sukuk, or other compliant assets while using the tax benefits of the ISA wrapper.

An IFISA may be relevant for investors looking at alternative income or asset-backed finance, but only if the underlying structure is genuinely Sharia-compliant. The contract matters more than the label.

A Junior ISA can support children’s wealth planning, while a Lifetime ISA may be relevant for a first home or later-life savings if the rules and investment options suit the investor’s situation.

Investors managing substantial capital benefit from viewing ISAs as a single component within a broader, integrated wealth strategy. An ISA functions best when integrated with pensions and taxable investment accounts, ensuring all components of the wealth stack work in tandem. The aim is to build a portfolio where each part has a clear purpose, an appropriate time horizon, and a structure that remains aligned with Islamic finance principles.

Halal ISA vs SIPP vs Taxable account

An ISA is only one part of the wider picture for any serious investor. It should usually be compared with pensions and taxable investment accounts before deciding where new capital should go.

An ISA is useful for flexible, tax-efficient saving and investing. It can support cash savings, long-term investments, or a mix of both, depending on the provider and product. The main limitation is the annual ISA allowance, so investors with larger amounts to deploy may need to use other wrappers as well.

A SIPP is different. It is designed for retirement-focused investing and may offer valuable tax advantages, but access is restricted until later life. This makes it useful for long-term planning, but less suitable for money that may be needed sooner.

A taxable investment account can be useful once ISA or pension allowances have been used, or where the investor wants more flexibility. The trade-off is that income, dividends, or gains may be taxable.

The Sharia question applies to all three. A SIPP is not automatically halal or haram. A taxable account is not automatically halal or haram. The same is true of an ISA. The core concern involves the specific assets held within the wrapper, the mechanics of how profit is produced, and the alignment of all underlying contracts with Sharia standards. 

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WHAT IS ZAKAT?

Zakat is one of the five pillars of Islam. It is an obligatory act of worship and is also a mandatory form of charity for Muslims. It has always been seen as a means by which people can achieve social impact through the redistribution of their wealth. The five pillars of Islam are the absolute fundamentals of Islam and include the following:

• Faith (shahada)
• Prayer
• Zakat
• Fasting
• Hajj

Every Muslim is expected to fulfil these five pillars of Islam which serve as the very fundamental acts of worship prescribed by the Islamic faith.

Paying zakat, sometimes referred to as almsgiving, is an obligation for every Muslim who is able to and serves to bring economic equality, fairness, and to rebalance societal injustice.

The Obligations Of Zakat

Muslims who have the financial means and capability are required to pay zakat. They must donate 2.5% of their wealth (see our zakat calculator to work out how much you need to pay). The 2.5% is calculated on money and assets.

The aim of zakat funds is to ensure that they are used to provide the basic necessities for families and communities in need. These needs can include the provision of food, shelter, clothing, education and healthcare.

One of the most important elements of zakat is that payment of it is seen as a means of purifying your wealth whilst demonstrating empathy and compassion for others. In fact, the word zakat actually means 'cleansing' or 'purifying'.

The whole concept is based on the idea that once an individual donates a percentage of their wealth to charitable causes, they fulfil their moral obligation to serve others and build stronger communities and economies. Zakat is particularly important in times of crisis, as it can be used to alleviate hardship via the distribution of wealth.

Zakat is not the same as sadaqa which is encouraged but not obligatory. Zakat is an annual payment that is worked out in a specific way and spent in a specific way.

The Exemptions From Zakat

There are some important exemptions to be aware of when it comes to zakat.

Firstly, there are exemptions for those people who do not have to pay zakat and these include:

• children
• the mentally ill
• the infirm and elderly
• slaves
• Non-Muslims
• the very poor

WHO CAN RECEIVE ZAKAT?

Islamic finance principles set out clearly who can receive zakat. Those eligible to receive zakat include the following:

• Poor people
• The needy
• Debtors who cannot repay their debts
• Orphans
• Widows
• The stranded and destitute
• Travellers
• Slaves or captives
• New Muslims
• Those fighting a just cause

It is very important that when you pay zakat the recipients meet the eligibility criteria set out in Sharia law. Always make the intention of helping those who are in need and adhering to the principles of Islamic finance.

WHAT ROLE DOES SOCIAL JUSTICE PLAY IN ISLAM?

Social justice is one of the fundamental principles of Islam and Islamic finance. The Islamic framework is centred on social justice in all aspects from individual behaviour, to financial transactions, to how we behave in relationships with others.The teachings of Islam place great significance on ethical and moral behaviour. Islam promotes social justice by emphasizing the importance of the following concepts:

• Anti-discrimination: all humans are seen as equal in Islam and discrimination in any form is prohibited. In fact, the Prophet Mohammad's final sermon reiterated how important it was to treat everyone equally and fairly.
• Economic equity: Islam promotes economic justice by ensuring there are frameworks in place for wealth distribution. Zakat plays a key role in the distribution of wealth. Furthermore, the prohibition on interest further prevents exploitation and inequality.
• Charity: as already mentioned the concept of charitable giving is an essential element of Islam. Charitable giving takes place via zakat and sadaqa (amongst other forms of donation). Muslims are encouraged to consistently donate to the poor.
• Gender equality: as mentioned above, Islam believes that men and women are equal and it actively promotes gender rights (particularly those of women) and equality. The Quran consistently mentions treating people with respect and fairness.
• Legal justice: Sharia rules set out the legal framework within which Muslims operate and these rules focus on justice, fairness, and equity. The legal judicial system in Islam operates to ensure that justice and fairness are implemented.
• Ethical behaviour.

The Potential Of Zakat

The actual potential of zakat is large, and estimated to be valued in the region of $200 billion - $1 trillion (this is according to research from the Institute of Development Studies and the World Bank). It is difficult to estimate the exact amount paid each year, but it is clear that Muslims who pay zakat on an annual basis are some of the biggest and most consistent charity givers in countries across the world.

Whilst the Western world is still learning about the impact and potential of zakat, Muslim economies have harnessed the potential of zakat for many decades by establishing leadership institutions to manage and distribute zakat. In addition, Muslim countries have had discussion and debate with scholars relating to zakat and how best to use it, incorporating it into fiscal policy.

HOW DOES ZAKAT HAVE A SOCIAL IMPACT?

• Empowers individuals and communities
• Alleviates poverty
• Optimisation of social good
• Social cohesion building
• Wealth distribution
• Funding charitable projects (such as climate and environment change programmes, education, and healthcare initiatives and practices)
• Economic development
• Promote social justice

An underlying philosophy of Islamic finance and Zakat is the concept of mobilising finance for the greater good. Islamic finance embodies socially responsible actions whether from companies or individuals.

Zakat And Sustainable Development Goals

As zakat is applicable to all Muslims across the globe, it is one of the largest and most successful forms of philanthropy. It acts as one of the largest methods of wealth transfer from the rich to the poor that takes place consistently and with clear guidelines.

Inspired by the Islamic faith, zakat is taking on relevance in countries throughout the world including the UK, United States, Australia and beyond.

Alleviating poverty, inequality, and hunger are not only central tenets of Islam and Islamic finance, but they are also part of the UN's sustainable development goals. According to the Quran there are 8 categories eligible for zakat (see above) and these all align strongly with sustainable development goals.

Some countries such as Indonesia have started collaborating with zakat donors to achieve partnership working towards sustainable development goals. This is a win-win for Muslims as Islam and Sharia rules relating to financial transactions state that every person should seek to work collaboratively and fairly for the good of society.

Conclusion

The power of zakat to harness social impact through charity is undeniable. When you clearly understand what zakat is and its function in society it becomes clear that zakat has the power and potential to alter lives and bring equity.