Merge pull request #1766 from PolicyEngine/codex/fix-class4-annual-maximum

Fix Class 4 NI annual maximum rate factor

Author: MaxGhenis

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.

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,
+    )

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)