What happens when you upgrade?

So later this month I'll be able to get an early upgrade with O2. I had an iPhone 4S (it actually got stolen when I was in Paris a month ago and I've filed a police report and got a new sim etc) and I plan on upgrading to the iPhone 5. I've never upgraded before and I was just wondering if there were any catches to upgrading early so I don't really know exactly what happens, do you have to pay extra because it's the newest model? On my 4S I paid £40 a month.

If you upgrade early you want get as good deals as you could have if you waited. Either you won't be offered the iPhone 5 or you'll have to pay more for it.