Why screen your own stocks?
Managed halal funds like Wahed Invest are a convenient way to invest in line with Islamic principles without doing any research yourself. But they come with trade-offs: higher fees, less flexibility, and a limited range of assets.
Self-directed Sharia screening gives you full control. You choose the companies, you apply the criteria, and you can build a portfolio that reflects your own conviction and risk appetite — at the lowest possible cost. The process is more involved, but for serious investors it is the most transparent and cost-efficient route.
Important: This guide explains how screening works and the tools available. It does not constitute a fatwa or personal religious ruling. For complex situations or if you are unsure whether a specific holding is permissible, consult a qualified Islamic scholar.
The Sharia screening criteria
Sharia screening has two components: business activity screening (what the company does) and financial ratio screening (how the company is financed). A stock must pass both to be considered halal.
There is no single global standard — different scholars and screening bodies apply slightly different thresholds. The most widely used standards are from AAOIFI (the global Islamic finance standards body) and MSCI, which runs the MSCI Islamic Index. Zoya uses a scholarly-reviewed methodology that broadly aligns with AAOIFI.
Business activity screening
The first check is what the company does for a living. Companies with significant revenue from any of the following sectors are excluded:
- Alcohol — production, distribution, or retail
- Conventional finance — banks, insurers, and lenders that operate on interest (riba)
- Tobacco — manufacturing or distribution
- Weapons and defence — particularly manufacturers of controversial weapons
- Gambling — casinos, betting companies, online gambling platforms
- Pork — production or processing
- Adult entertainment — any company deriving revenue from pornography
Most screening methodologies apply a revenue tolerance threshold — typically 5% — for companies that derive a small, incidental portion of income from impermissible activities. For example, a supermarket that sells a small amount of alcohol but derives the vast majority of revenue from permissible goods may still pass screening, with a purification calculation applied to the impermissible portion. Companies whose primary business is prohibited are excluded outright with no tolerance.
Example: Apple passes business activity screening — it makes phones and software. HSBC fails — its primary business is interest-based lending. A diversified retailer like Tesco may pass with a purification adjustment applied to its alcohol revenue.
Financial ratio screening
Even if a company's business activity is permissible, it must also pass financial ratio checks. These assess whether the company is excessively leveraged with interest-bearing debt or holds too much cash that earns interest.
The three key ratios most screening methodologies apply (using AAOIFI thresholds as a reference):
| Ratio | What it measures | AAOIFI threshold |
|---|---|---|
| Debt ratio | Interest-bearing debt as a % of total assets | Less than 30% |
| Cash & interest-bearing securities | Cash + interest instruments as a % of total assets | Less than 30% |
| Impermissible income | Revenue from prohibited activities as a % of total revenue | Less than 5% |
These ratios are calculated from the company's most recent financial statements. A screening tool like Zoya does this automatically — you do not need to read balance sheets yourself.
Tools to use: Zoya and others
Zoya is the most accessible and widely used halal stock screener for retail investors in the UK. Enter any stock ticker and it returns a pass, fail, or questionable rating with a full breakdown of why — revenue sources, debt ratios, and the specific criteria applied.
The free tier covers basic pass/fail results. The premium plan (approximately £75/year on the UK App Store) unlocks:
- Detailed revenue breakdowns by segment
- Purification calculations — how much of your dividend or capital gain to give to charity
- Portfolio tracking — screen your whole portfolio at once
- Watchlists and alerts when a stock's compliance status changes
Other tools worth knowing:
- IslamicFinanceGuru (IFG) — publishes a regularly updated halal stock list and has its own screening methodology, useful as a cross-reference
- MSCI Islamic Index constituents — publicly available; if a stock is in the MSCI Islamic Index it has passed institutional-grade Sharia screening
- S&P 500 Shariah Index — another institutional reference list covering large-cap US stocks
Tip: Cross-reference at least two sources before buying. Screening methodologies differ slightly — a stock that passes on Zoya may be borderline on IFG's list. If a stock is borderline, consult a scholar or simply avoid it.
Executing your trades in the UK
Once you have screened a stock and are satisfied it passes, you need a brokerage platform to buy it. Any FCA-regulated broker will work — the platform itself does not need to be halal-certified, because you have already verified the permissibility of each individual holding.
Platforms commonly used by British Muslims for self-directed halal investing:
- Trading 212 — commission-free trading, stocks and shares ISA, fractional shares from £1. Important: disable the interest on uninvested cash feature in account settings.
- Freetrade — commission-free, clean interface, ISA available. Similar to Trading 212 — check and disable any interest-bearing cash features.
- AJ Bell — more traditional broker, wider range of assets including investment trusts. Slightly higher fees but strong reputation and broad asset access.
- Interactive Brokers — best for experienced investors wanting access to international markets and a very wide range of stocks.
ISA wrapper: Holding your halal stocks inside a Stocks and Shares ISA means any growth and income is free of Capital Gains Tax and Income Tax. This is fully permissible — the ISA wrapper itself is not interest-based. Use your £20,000 annual ISA allowance before investing in a general account.
Purification of impermissible income
Most companies that pass Sharia screening still derive a small percentage of revenue from impermissible activities — within the 5% tolerance threshold. As a shareholder, you are considered to have received a proportional share of that impermissible income. Islamic scholars generally require that you purify this by giving the equivalent amount to charity.
How to calculate purification:
- Find the impermissible income percentage for your stock (Zoya premium shows this)
- Multiply by your total investment return (dividends + capital gain) for the period
- Donate that amount to a charitable cause — it does not count as sadaqah or Zakat, it is simply removing the impermissible portion from your wealth
Example: if a stock has 2% impermissible revenue and you made £500 in returns, you would donate £10 (2% of £500) to charity. Most investors do this annually when reviewing their portfolio.
What about halal ETFs?
If building a self-screened portfolio feels too complex, halal ETFs offer a middle ground — pre-screened baskets of stocks that track Islamic indices, at low cost.
The most widely available in the UK:
- iShares MSCI World Islamic UCITS ETF (ISWD) — tracks the MSCI World Islamic Index, available on most UK platforms including Trading 212 and Freetrade. Screens global developed market stocks against AAOIFI-aligned criteria.
- iShares MSCI USA Islamic UCITS ETF (ISUS) — US-focused Islamic ETF, similar methodology.
These ETFs are not managed by an Islamic finance institution, but their indices are independently screened against published Sharia criteria. They are widely considered acceptable by Islamic finance scholars, though as always you should verify with a qualified scholar if you have doubts.
Buying an Islamic ETF on Trading 212 or Freetrade gives you a low-cost, diversified, broadly halal portfolio without needing to screen individual stocks — the best of both worlds for most investors.
Frequently asked questions
Yes — if you are investing in individual stocks on a self-directed platform, you are responsible for verifying that each holding is Sharia-compliant. A tool like Zoya makes this quick and straightforward. If you buy a pre-screened halal ETF like ISWD, the screening is already done for you.
Trading 212 itself is not a halal-certified platform and carries no Sharia supervisory board endorsement. However, it can be used as a vehicle for halal investing if you screen every stock you buy, disable the interest on uninvested cash feature, and avoid any interest-bearing products on the platform. The permissibility of your portfolio depends on what you hold, not the platform you use.
A company's compliance status can change — if it takes on excessive debt, acquires a prohibited business, or its revenue mix changes. Zoya premium sends alerts when this happens. If a stock you hold subsequently fails screening, scholars generally advise selling it as soon as reasonably possible and purifying any gains received during the non-compliant period.
It depends on your situation. Managed funds like Wahed are simpler, require no research, and are suitable for most investors. Self-screening gives you more control, lower fees, and the ability to invest in specific companies — but requires ongoing monitoring. Many serious investors use both: a core halal ETF or managed fund, plus a smaller self-screened portfolio of individual stocks they have conviction in.
No — purification donations can go to any charitable cause, Islamic or otherwise. The purpose is to remove the impermissible income from your wealth, not to earn reward (that is sadaqah). Any legitimate charitable organisation qualifies.