In exactly the same position as you!
I've been on the phone with Barclays and Apple today.
Basically, if you're on the iUP, you have two choices on Friday.
1. When you arrive in store to pick up your new iPhone you can give your current X back and take out a new contract and you're good to go after paying £56 + £69 (11th month + upfront cost).
2. You can keep your phone and take out a brand new contract (providing your credit score is good).
I'm going for 2. Friday afternoon I'll send the X off to MM and wait for them to send me the money (if all goes to plan). Once they sent the money I will call Barclays and pay off the final total for the iPhone.
@Jinjin - I called about getting a refund for AppleCare but they said it wouldn't be possible, but I see where you're coming from as you won't use the final 12 months of it.