I want to cut my sim card into a micro card for iPhone 4?

I'm currently on a £15 month contract on vodafone where I get unlimited texts, 300 minutes and 500MB of internet. Because my current phone isn't working I'm going to buy an unlocked iPhone 4, I don't want to pay £30+ a month so is it possible to cut my sim card into a micro sim? Will this work? And will I be able to still pay £15 a month?

And what good would it do? It's a printed circuit board.

You can trim it down using a template, but the results aren't always successful and if you ruin the SIM you lose everything on it.

It's much easier to just pop into a Vodafone store and ask for a microSIM; I'm also on a Vodafone contract and have had to change back and forth from a regular miniSIM to a microSIM a few times now as I've switched between different borrowed phones since my contract one was stolen. It takes just a few minutes and Vodafone have never charged me a penny to do it. Their staff pop your old SIM into a machine which copies the data onto the new SIM and they take care of transferring your number onto the new SIM. The only downside is that in theory the number transfer can take a few hours, but I've only ever had to wait around five minutes at most unless porting my number onto a different network altogether.

My friend did it the other day and it worked. As long as you get the SIM card cut perfectly, you have nothing to worry about. All your contract terms, etc. Are unaffected by a change in phone; as long as the SIM card is where it should be, i.e. In the phone you are using.

To answer your three questions specifically:
1) Yes, you can cut your SIM card into a micro SIM card, but you have to ensure it is the exact shape of the micro SIM card tray in your iPhone.
2) Yes, if step one is done correctly, it will (or definitely should) work.
3) Yes, all your contract… Stuff remains the same.