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Reset your iPhone, maybe this will make it show the free storage afterwards. To reset,mpress and hold Home and Power button simultaneously until the Apple logo appears. Let go of both, your device will power up on it's own. This reset won't remove data or change settings.
It's also possible that the software needs some time to recognize the free storage space. Wait for a few hours. If it still shows the same message, connect your device to iTunes on a computer and take a look at your storage space there.
If you see quite a bit of storage called "Other" (orange), restore your iPhone using iTunes. This should help getting rid of the additional storage.
Make sure there's a most recent backup before restoring.
Hope that helps.