Your budget will limit you to the lower-end iMac range. As you are going to be using your iMac for music production, you would benefit from a Fusion Drive or SSD storage as the 2.3 GHz and 3.0 GHz 21.5-inch iMacs use 5400-rpm hard drives. That might be fine for general use, but certainly not the ideal drive speeds for music production.
If you don't want to save up in order to buy a 27-inch iMac, you should either purchase the 3.0GHz 4K iMac but with a 1 TB Fusion Drive which brings the total to £1,339, or the high-end 3.4 GHz 4K iMac which comes with a 1 TB Fusion Drive for £1,449 - this model is almost on par with the low-end 27-inch iMac in terms of processor and graphics performance.
You will get the best performance if you purchase an iMac with SSD storage, but for music production I imagine 256 GB won't be enough - so you might need to customise your iMac to include a minimum 512 GB SSD which costs £270 as a customisation upgrade, so you might find the best value-to-performance ratio in a Fusion Drive if an SSD is too expensive for you. If you were to customise your order to replace the stock configuration with a 512 GB SSD in the 3.0 GHz 4K iMac, that would bring the total to £1,609. On the 3.4 GHz 4K iMac, that brings the total to £1,719.
Also consider whether 8 GB RAM will be sufficient for your needs for the length of time you intend to keep your iMac. On the 2017 21.5-inch iMacs, the RAM can't be upgraded without removing the display which is glued together - you would need to take it to an Apple Store or Apple Authorised Service Provider, and those upgrades do not come cheap. On the 27-inch iMacs (except the iMac Pro), there is a user-accessible RAM access door on the back of the machine, which allows you to perform the RAM upgrade yourself.
Finally and most importantly,
you do not need the AppleCare Protection Plan. In the UK, your new iMac will be covered under the Consumer Rights Act 2015. Put it this way: if your iMac needs repairing and the same issue reoccurs later on, you can legally ask for a refund or replacement (more info
here) - you can't do that under the AppleCare Protection Plan or the Apple Limited Warranty. The only reason you might need the extended warranty from Apple is to get help using the operating system after the first 90 days, but do know the knowledge of people working in AppleCare - especially on pro apps - is very limited even though Apple doesn't like to admit that. If you live in the United States, that might be a somewhat different story but here you always go through to the AppleCare team in the Republic of Ireland, and they don't know anything about the pro apps like Logic. They expect to help idiots only, and I know that from first-hand experience. AppleCare are a friendly bunch of people (usually), but they are otherwise fairly useless.
Best of luck with your adventure into music production. It's great to see artists that truly care about their work and sharing that with others. Music certainly helps me get through those dreadful days at work
.