Restarting my iPhone fixed this right away for me.
iOS 14.4 (18D52)
System Information
macOS Version 11.2.1 (Build 20D74)
Xcode 12.4 (17801) (Build 12D4e)
Failed to prepare device for development.
Domain: com.apple.dtdevicekit
Code: 806
Recovery Suggestion: If you are certain that Xcode supports development on this device, try disconnecting and reconnecting the device.
User Info: {
AssociatedMobileDeviceFunction = AMDeviceMountImage;
DVTRadarComponentKey = 487927;
NSLocalizedFailure = "This operation can fail if the version of the OS on the device is newer than the version of Xcode that is running.";
}