From ef165dfc6b060404a34524003c7dd083ca486a58 Mon Sep 17 00:00:00 2001
From: Max Ghenis <mghenis@gmail.com>
Date: Sat, 6 Jun 2026 00:50:49 +0100
Subject: [PATCH] Fix Class 4 NI annual maximum rate factor

---
 changelog.d/1765.md                           |  1 +
 .../tests/test_ni_class_4_maximum.py          | 26 +++++++++++++++++++
 .../class_4/ni_class_4_maximum.py             |  2 +-
 3 files changed, 28 insertions(+), 1 deletion(-)
 create mode 100644 changelog.d/1765.md
 create mode 100644 policyengine_uk/tests/test_ni_class_4_maximum.py

diff --git a/changelog.d/1765.md b/changelog.d/1765.md
new file mode 100644
index 000000000..542bd1537
--- /dev/null
+++ b/changelog.d/1765.md
@@ -0,0 +1 @@
+- Correct the Class 4 National Insurance annual maximum calculation to use the current main Class 4 rate factor.
diff --git a/policyengine_uk/tests/test_ni_class_4_maximum.py b/policyengine_uk/tests/test_ni_class_4_maximum.py
new file mode 100644
index 000000000..108049c99
--- /dev/null
+++ b/policyengine_uk/tests/test_ni_class_4_maximum.py
@@ -0,0 +1,26 @@
+import pytest
+
+from policyengine_uk import Simulation
+
+
+def test_class_4_annual_maximum_uses_current_main_rate_factor():
+    year = 2026
+    monthly_primary_class_1 = {f"{year}-{month:02d}": 500 for month in range(1, 13)}
+    sim = Simulation(
+        situation={
+            "people": {
+                "person": {
+                    "age": {year: 40},
+                    "self_employment_income": {year: 100_000},
+                    "ni_class_1_employee_primary": monthly_primary_class_1,
+                }
+            },
+            "benunits": {"benunit": {"members": ["person"]}},
+            "households": {"household": {"members": ["person"]}},
+        }
+    )
+
+    assert sim.calculate("ni_class_4_maximum", year)[0] == pytest.approx(
+        46_484,
+        abs=0.01,
+    )
diff --git a/policyengine_uk/variables/gov/hmrc/national_insurance/class_4/ni_class_4_maximum.py b/policyengine_uk/variables/gov/hmrc/national_insurance/class_4/ni_class_4_maximum.py
index bfe1f4b5d..c7d44a059 100644
--- a/policyengine_uk/variables/gov/hmrc/national_insurance/class_4/ni_class_4_maximum.py
+++ b/policyengine_uk/variables/gov/hmrc/national_insurance/class_4/ni_class_4_maximum.py
@@ -30,7 +30,7 @@ def formula(person, period, parameters):
         case_1 = (step_4 >= 0) & (step_4 > other_aggregate_contributions)
         case_2 = (step_4 >= 0) & (step_4 <= other_aggregate_contributions)
         case_3 = step_4 < 0
-        step_5 = step_4 * 100 / 9
+        step_5 = step_4 / main_rate
         profits = person("self_employment_income", period)
         step_6 = lpl - min_(upl, profits)
         step_7 = max_(0, step_6 - step_5)