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Model Y towbar, can’t remove key when tow ball removed

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I’ve had the towbar on my Model Y for a few weeks, and my first trip with it and the bike carrier is coming up tomorrow. I’ve practised fitting/removing it today and whilst I can get it in and out, I can’t get the key out of the towbar once it’s off the car. When off the car the key won’t turn and the locking handle is in the partially out position and won’t turn.

The manual just says remove the key. Touchless service means I didn’t get a demonstration of what to do.

What am I doing wrong?
 
Assuming that it's the same hitch as the Model 3, then you have to make sure that the locking cylinder stays in the open position. Otherwise you won't get the key out.

The model 3 removal instructions say:

Disconnecting the Tow Hitch
After towing, remove the hitch:
1. Insert the key and turn to align the top of the key with the Unlock icon.
2. While firmly holding the bottom of the hitch (to prevent it from dropping to the ground), pull the locking cylinder out approximately 0.5 cm, and turn it clockwise until the Lock icon shifts to the top. At this point, the locking cylinder is unlocked in the "Open" position and the hitch drops out of the housing.
WARNING: Be careful when turning the locking cylinder. If it does not lock into the "Open" position, it automatically retracts into its original "Closed" position and can pinch your fingers.
3. Reinstall the dust cover on the hitch housing to prevent dirt from accumulating inside the housing by snapping in the push clips.
4. Close the dust cover on the hitch's locking cylinder and store the hitch in a secure location.
 
Yes, that probably is the reason, the manual implies the key does come out as it tells you to replace the dust cover on the key cylinder. Looks a bit like they copied the model 3 manual and didn't update the removal instructions.
 
Mine is an aftermarket towbar and i just press on the small ball bearing at the top of the hitch, this allows the lock to spring around to the locked position and i can remove the key. I just insert the key and rotate the locking mechanism when i want to refit it.