The Apple Silicon chipset will perform better than the Intel-based iMac you currently have, for sure. You mentioned you're moving into Medium format photography, and as those files are much larger, 16GB would be the minimum RAM I'd recommend.
HD space is up to you, of course. You can always store your PS files on an external SSD or USB-C drive. Then you're only limited by the size of the drive you elect to go with.
Of course, you'd then want to consider backups. Time Machine would back up your internal drive just fine, but if all your photos are on the external drive, then you'd be on a high wire without a net. (My brother, an advanced amateur photographer, just had his 2TB external drive with 40+ years of photos fail, and he's now going to have to spend $2,000 for a data recovery service to rescue those files. He'll soon be investing in a cloud-based storage service...something like BackBlaze.)
So, as far as HD storage is concerned...for me, there are three options:
- 500GB internal storage, but all photos stored on an external drive.
- 1 or 2TB internal storage, with all files/photos backed up to an external drive with Time Machine.
- 500GB internal storage, with external drive for photos...using a cloud system to backup the photos, and Time Machine for backing up the iMac itself.
You might want to consider holding off until Oct 30th, as Apple will be revealing SOMETHING that afternoon. Rumors are flying about regarding what that SOMETHING will be, but nobody will know for sure until then.
As Yer_Man pointed out, you're not limited to an iMac. You could always go with a Mac Mini or Mac Studio if all in one isn't important. (Or even a MacBook Pro if you want the portability).
Hope this helps.