Ok so,

I want to get the iPhone contract on O2, which is £21 a month. There's no doubt i'll go over this £21 allowance and its the cheapest iPhone deal.
So, my question is, Am I able to put a £10 top up on this phone? every now and again so that I don't go over the £21?

Or is it not possible?

There is no such thing as a contract top up. You pay x amount per month for a certain number of free minutes, texts etc. Then when you go over that allowance the excess is simply tacked on to your bill.

If you're definitely going to be going over it every month, just get a higher contract?

If you are going to go over your allowance chances are you are better on a higher tariff. Any usage over allowance would be added to your bill. There is no way to use a top up voucher or card to top up a pay monthly account

T-mobile did use to do a service called mix it and later called ufix which does do what you want but I have no idea if it is still available or not

You can't 'top up' in the PAYG sense, however you could call up and make additional payments on your account (same as when you over pay gas/electric you'll just build up a credit).

I echo the other comments though, if you think you'll go over it's best to have a better tariff. Out of bundle charges can be very high.