See the following from iCloud storage upgrades and downgrades - Apple Support
You can buy more iCloud storage from your iPhone, iPad, iPod touch, Mac, or PC. When you choose a new storage plan, your existing plan is canceled and you're charged the prorated cost of the larger plan (the cost of the higher-tier plan minus the prorated cost of the previous plan). Your plan is upgraded immediately, and the new monthly payment date is updated to reflect the purchase date for the new plan.
You're billed every month for your storage plan unless you cancel by downgrading your plan. You get an email each month to remind you of your upcoming payment.
I'm not sure exactly how they will handle your case as the billing will switch from annual to monthly.