INCOME TAX

107(bp) On19 April 2021 Simon purchased a derelict freehold house for £127,000.Legal fees of £1,800 were paid in respect of the purchase. Simon then renovated the house at a cost of £50,000,with the renovation being completed on 6 August2021.He immediately put the house up for sale, and it was sold on 27August 2021 for £260,000.Legal fees of £2,600 were paid in respect of the sale. Simon financed the transaction by a bank loan of £150,000that was taken out on 19 April 2021at an annual interest rate of 6%.Thebank loan was repaid on 28 August 2021. SOLUTION Simon– Income tax and NICs for 2021/22 if trading £ £ Income 260000 Less: costs incurred 127000 house legal fees on acquisition 1800 renovation 50000 legal fees on sale 2600 loan interest £150,000*6%*4/12 3000 (184,400) ------------------- Trading income/net income 75600 Personal allowance (12570) ----------------- Taxable income 63030 ------------------- Good day,Please i don't understand why the legal fees on acquisition and legal fees was an allowable expense when calculating the trading income.I'll appreciate if you can explain better