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A salary paid to you as an employee or as the director of your company is regarded as an allowable expense, as are any National Insurance contributions.

Providing you fall outside of IR35 legislation and have no contract of employment between yourself as the director and your company, you may choose the level of your salary.

To put it simply, IR35 is used to determine whether you are “employed” by your client or providing “self-employed” contracting services through your limited company.

You may pay a tax-efficient salary up to the National Insurance threshold, i.e. before you become liable to start paying contributions. You will save money by paying the lower monthly salary because after you cross the threshold you will have to begin paying NICs.

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