Verify your Apple TV model. Settings﹥General﹥About﹥Model﹥. Is it A1427, A1469, A1625, A1842, or A2169?
Verify your other video settings on Apple TV:
Set HDMI Output to YCbCr (not RGB). Set Chroma to 4:2:0 [needs HDMI 2.0 or later] (instead of 4:4:4 or 4:2:2).
Furthermore, I would advise to set Match content for both Frame Rate and Dynamic Range, when a TV handles that well. I would recommend to set video Format to use SDR as default, and only use HDR for HDR content through the Match Content setting.
Settings﹥Audio/Video﹥Video﹥Resolution﹥1080 (no option to select 4K)
I think mine (tvOS 15) has the navigation path as: Settings﹥Video and Audio﹥[ᴠɪᴅᴇᴏ] Format﹥. I.e. no separate Resolution heading. Instead resolution, dynamic range, and refresh rate are lumped together as group options. Adjust video settings - Apple TV user guide - Apple Support
Apple TV video Format settings reflect what it can detect, so that invalid options can’t be made. If you see 1080p as maximum when 4K should be available, then something is limiting the resolution output. Either the cable spec (18 Gbps or better), the cable length, the TV HDMI port, or any equipment in between (HDMI splitters, HDMI switches, HDMI audio extractors, converters).