Unlock with iPhone not working with iPhone 12

According to:

If your iPhone doesn’t unlock your Apple Watch after updating to iOS 14.7 - Apple Support

iOS 14.7.1 should have fixed that issue. All I can suggest is to restart your Apple Watch and its paired iPhone. If necessary (device not responding), try a forced restart. Both methods can be found here:

How to restart your Apple Watch - Apple Support

Restart your iPhone - Apple Support

If that doesn't help, the next steps would be to unpair and pair your watch again and restore from the backup just created. This should result in no loss of data. It deletes all temp and corrupted files and re-indexes the file system.

Unpair and erase your Apple Watch - Apple Support

Set up your Apple Watch - Apple Support

also, see all the replies to:

After iOS 14.7.1 update my iPhone doesn't… - Apple Community

Turn off "Unlock with Apple Watch" under iPhone settings -> Face ID & Passcode (for touch ID, it may be slightly different title).

This is a bug, and Apple will most likely issue an update in the next few days/weeks.

If you want both, you may be able to do the following dance (assuming you have Face ID; not sure if this will work for Finger Print Reader iPhones):

o iPhone screen blank (screen off)

o Raise Apple Watch until the numeric passcode unlock screen appears.

o Then immediately wake the iPhone and unlock it.

If you wake the iPhone too early, it will not work.

If you wait too long to wake and unlock the iPhone, it will not work.

NOTE: You may find suggestions to Unpair and pair the Apple Watch again. This ONLY appears to work, because that turns off "Unlock with Apple Watch". It a lot of work, to turn off the option you can do yourself in just a few seconds.