Educational content only. We analyze court-ordered interest
using the principle of Purification (Tazkiyah) and the classical
definition of Riba.
This is not financial, legal, or religious advice. Please consult a qualified
scholar or professional for your specific situation. We do not issue fatwas.
"I won my case, but the payout includes £840 in interest. Can I keep it?" In the UK, legal settlements for personal injury, employment tribunals, or insurance claims often include an "Interest" component, calculated from the date of the loss to the date of the judgment. For the Muslim recipient, this presents a significant ethical dilemma.
Scholarly consensus overview
The overwhelming majority of modern scholars and Fiqh councils (including the IOF and AMJA) agree that interest added to a legal award is classified as Riba. While the core compensation (the "principle") is yours to keep, the interest added by the state or court is an increase without a counter-value (Awad) and must be purified.
Statutory Interest: The UK Legal Context
In the UK, the most common form of interest on a settlement is Statutory Interest, currently set at 8% per year under the Judgments Act 1838.
- Why courts add it: To compensate the claimant for being "out of pocket" while they waited for the case to conclude.
- Islamic Classification: Even if the intent is "compensation for delay," if it is calculated as a percentage of the debt/award over time, it meets the definition of Riba al-Jahiliyyah.
Tool 1: Settlement Breakdown
Input your settlement figures to see how much of your payout is permissible and how much requires purification.
Compensation Breakdown Tool
Separate the permissible core award from the interest-based additions in a legal settlement.
Requirement: Separate principle from interest. Educational Only.
The Red Line
Where do scholars draw the line?
The line is drawn between Restitution (making you whole) and Profit (gain on capital).
- 1Legal Fees:
If the court awards you your legal costs, this is NOT interest. It is a reimbursement of expenses you actually paid.
- 2General Damages:
Pai and suffering (General Damages) are permissible. These are non-monetary losses translated into a lump sum.
- 3The 8% Addition:
The specific "8%" (or other rate) addition for the duration of the claim is Riba.
The Principle of Purification (Tazkiyah)
Purification is the process of removing "unclean" (Haram) wealth from one's ownership. The key rule is that you must not benefit from this portion in any way—spiritually or materially.
This means you cannot use interest on compensation to pay for your groceries, pay off your credit card, or even pay your own taxes.
Tool 2: Separation Workflow
Follow this standard practice used by many UK-based Muslims to ensure their settlement wealth is purified correctly.
Interest Separation Planner
A step-by-step workflow for ethically handling the interest portion of a legal payout.
Identify Interest Component
Request a detailed breakdown (e.g., Form 70.01) from your solicitor.
Separate Funds
Transfer the interest amount to a separate sub-account or 'pot' immediately.
Apply Purification
Donate the separated interest to a charitable cause with no intention of reward.
Legal Note: In the UK, interest on compensation is often statutory (e.g., 8% under the Judgments Act 1838). You cannot refuse the court's calculation, but you have full control over how you dispose of the funds once they reach your account.
Ethical Disposal of Interest Funds
Where should the "unclean" money go? Scholars advise that it should be given to public welfare or the poor, but without the intention of Sadaqah (rewarding charity). You are simply returning the money to the public pool because it is not yours to own.
Tool 3: Disposal Options
Analyze the best destinations for the interest component of your payout.
Disposal Options Guide
Ethical destinations for interest-based funds (Purification).
Public Welfare Projects
Highly SuitableRoad repairs, public lighting, or general infrastructure where individual names aren't attached.
Poverty Alleviation
SuitableEmergency relief for the destitute, provided no spiritual reward (Thawab) is expected.
Tax/Fine Payment
ProhibitedMost scholars prohibit using interest to pay personal debts, taxes, or legal fines.
Critical Intent Note
When disposing of interest (Riba), one must have the intention of "removing filth" rather than "giving charity for reward." The goal is purification of the remaining lawful wealth.
Summary & Practical Checklist
- Identify: Ask your solicitor for a "Certificate of Interest" or a full breakdown of the payout.
- Isolate: The core award is Halal (Restitution). The interest is Riba.
- Dispose: Give the interest portion to a charitable project for public benefit (roads, clinics, or the needy).
- Intent: Make the intention for purification, not for reward.
Methodology
Scholarly Research Base
Our research team analyzed the Statutory Interest definitions under the UK Judgments Act alongside the Ahadith prohibiting the accumulation of wealth through idle time (Riba). We focused on the distinction between Gharamah (fines/penalties) and Riba (interest on time).
We referenced the European Council for Fatwa and Research (ECFR) regarding the disposal of prohibited income in non-Muslim majority countries, ensuring the advice is practical for UK residents.
- Assembly of Muslim Jurists of America (AMJA): Ruling on Lawsuit Settlements (2012)
- Ibn Qudamah: Al-Mughni (Vols on Debt and Restitution)
- Judgments Act 1838 (UK): Section 17 (Statutory Interest)
- Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI): Shariah Standard No. 6 (Interest)