How to turn off passcode on iPhone after latest iOS update when the option is greyed out?

Remove all credit and debit cards, restart your iPhone and you should be able to turn off Passcode.

Banks do not permit cards to be added to Apple Wallet unless Passcode is enabled and set and Two Factor Authentication is enabled.

Do you have a business email account set up on your phone? If so, the administrators can enforce security policies, including passcode requirements.

Do you have credit or debit cards in your Apple Wallet app?

You can't use Apple Pay or the wallet if you don't have a passcode set on the phone.

Why would you want to remove the passcode?

That is arguably not a good idea...