iCloud & iCloud Photos · iCloud storage space and plans
What happens if I downgrade iCloud to less space than I'm using?
Short answer: Your data isn't deleted just because you're over the new limit, but iCloud becomes full: photos, iCloud Drive and backups stop updating until you're under it. Trim backups, files and photos before you downgrade.
Apple doesn't delete your data just because you're over the new limit, but your iCloud is then full: new photos stop uploading, iCloud Drive stops syncing changes and device backups stop until you're back under the limit. See what stops working when iCloud is full.
Before downgrading, reduce what you store — delete old device backups, move large files you don't need synced out of iCloud Drive, and archive old photos to a drive you trust. Keep an independent backup of anything important before making big changes.