I had the same issue too. Restarting iPhone in the past had worked, but not recently (on the same iPhone 12 and M1 MacBook Pro 2020). So I tried a few sequences. This morning, a specific sequence worked:
1) On iPhone, force closed all apps
2) While unplugged from Mac, restarted iPhone. Do not unlock the iPhone after reboot yet.
3) I restarted Mac for good measure. Log in. Open Image Capture.
4) While iPhone is still unlocked from restart, plug in the lightning cable from iPhone to Mac
5) You will see "Unlock iPhone to use accessories" on the iPhone
6) Finally, unlock the iPhone. You have to type in pass code (not Face ID, since you just restarted the iphone)
7) Image Capture finally read the images on the iPhone