Not enough iCloud storage

Did you already force restart your iPhone?

Force restart iPhone - Apple Support

Does your iPhone recognise the additional iCloud Storage space?

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Check your iCloud storage on your iPhone, iPad, or iPod touch

1. On your iPhone, iPad, or iPod touch, go to Settings > [your name] > iCloud.
2. The bar graph shows your overall storage usage.
3. Tap Manage Storage for more details.
4. Below the graph, you see a list of apps and features and how much iCloud storage they use. The apps and features that use the most storage are at the top of the list. You can tap an app or feature for more information.

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copied from: Check your iCloud storage online or on any device - Apple Support

The Apple Status page shows issues with some iCloud Services. Maybe you should contact Apple Support and ask, if iCloud Photos is still affected by this.

Apple - Support - System Status

Thanks for sharing your solution and marking it as solved, which makes it easier to find for other fellow users.