Microsoft 365 billing explained

How Microsoft 365 billing works — understanding your subscription, adding or removing licenses, reading your invoices, and managing payment methods.

Microsoft 365 is a subscription service — you pay for the number of licenses your team uses, either monthly or annually. This guide explains how billing works and where to manage it.

Quick summary

Licenses live under Billing → Your products in the Microsoft 365 admin center, and invoices under Billing → Bills & payments. You're charged per user per month or year. You can buy licenses at any time; removing them is the fiddly part, because the rules depend on what kind of billing account you have. You need a billing role to do any of this: at least Billing Administrator, or — if you're on a Microsoft Customer Agreement — owner or contributor on the billing account or billing profile.

Where to find your billing

Sign in to the admin center at admin.microsoft.com.

Check which view you're in. The admin center has a Dashboard view and a Simplified view, and the billing menus differ. Most people see Dashboard view. The steps below use it; where Simplified view differs, we say so.

Select Billing in the left-hand navigation. The two pages you'll use most are Your products (your subscriptions and licenses) and Bills & payments (invoices and payment methods).

Understanding your subscription

Go to Billing → Your products to see your active subscriptions — in Simplified view, select Subscriptions instead. Open one and you'll find its license count, how many of those are assigned, what you're paying and when it next renews.

If you have a mix of plans (for example, some users on Basic and some on Standard), each will appear as a separate subscription.

Adding a license

When you hire someone new and need to give them a Microsoft 365 account:

Go to Billing → Your products.

Select the subscription you want to add a license to.

Select Buy licenses.

Choose when the change happens. If recurring billing is on, you can apply it now or at renewal. If it's off, it has to be now.

Enter the new total, not the number you're adding. If you have 10 licenses and want five more, type 15. Then select Save. Microsoft bills you for the extra licenses within a day or two.

You get seven days to undo a mid-cycle purchase

If you buy licenses part-way through a billing period, Microsoft gives you seven days from the purchase to reduce the number you bought.

You can also add licenses when adding a user

When you go through the Add a user wizard in the admin center, it will prompt you to buy an additional license if none are available. See Adding a user in Microsoft 365.

Removing a license

When someone leaves and you delete their account, their license becomes available to reassign. If you want to reduce the number of licenses to save money:

Go to Billing → Your products.

Select the subscription, then select Remove licenses.

Enter the new total, not the number you're removing. If you have 10 licenses and want to drop 3, type 7, then select Save. Any credit due appears within a day or two.

Removing licenses is time-limited, and the rules depend on your billing account

This is where Microsoft 365 surprises people.

You can only remove licenses while recurring billing is turned on.
Removal is only possible during a limited window after you buy or renew, or if you've just bought more licenses. On a Microsoft Customer Agreement (MCA) billing account that window is seven days after buying or renewing.
If that window has closed, the subscription details page tells you the date your plan changes take effect.

If you're not sure which billing account type you have, ask us and we'll check for you.

Unassign the licenses first

You can't reduce the license count while every license is assigned to a user. Unassign one or more (or delete the users), then remove the licenses from the subscription.

Finding and downloading invoices

Go to Billing → Bills & payments. In Simplified view, select Products, then View invoices.

Select any invoice to view the details.

Select Download, then Download invoice to save a PDF copy. You can then forward it to your accountant or bookkeeper.

Microsoft doesn't issue payment receipts

Microsoft 365 services don't provide payment receipts. For card payments, your bookkeeper matches the invoice against your card statement. If you want the invoice emailed to you as well, that's a separate opt-in setting for billing notifications and invoice attachments — it doesn't happen automatically.

Updating your payment method

Go to Billing → Bills & payments and open the Payment methods tab. In Simplified view, select Products, then View payment methods. From here you can:

Add a new credit or debit card
Replace the card a subscription or billing profile is using
Update a card's name, billing address or expiry date
Delete a card you no longer use

A few rules that catch people out:

The payment method has to be issued in the same country or region as your Microsoft 365 tenant.
Paying by bank account is no longer available. Prepaid and gift cards aren't accepted either.
Adding a card doesn't attach it to anything. To actually start paying with it, replace the existing payment method on the subscription or billing profile.
You can't change a card number on an existing payment method. If the number changes, add the new card and replace the old one.

Monthly vs annual billing

When you buy, Microsoft asks you to choose a monthly or an annual commitment.

	Monthly	Annual
Commitment	One month at a time	A 12-month term
Cancelling	There's still a cancellation window; miss it and you turn off recurring billing instead	Same — cancel inside the window, or turn off recurring billing so it stops at the end of the term
Reducing licenses	Limited to a window after you buy or renew	Limited to a window after you buy or renew

We don't quote figures here, because Microsoft's prices change and vary by region. Check the current rates on Microsoft's own plan comparison before you commit — Microsoft 365 plans explained links to it — and remember that on either commitment, reducing your license count is only possible inside the window described above.

Common questions

Can I get a refund if I cancel mid-way through a year?

It depends on your billing account type, so don't assume a refund.

On a Microsoft Customer Agreement (MCA) account, you only get a prorated credit or refund if you cancel within seven days of the subscription starting or renewing. After that, the move is to turn off recurring billing so it stops at the end of the term.
On a Microsoft Online Subscription Agreement (MOSA) account, cancelling after the subscription starts or renews gets you a prorated credit or refund.
If you bought through a partner or reseller, talk to them.

One thing to do before you cancel: if you added your own domain to the subscription, you have to remove the domain first.

What happens if my payment fails?

Fix it quickly, but a subscription that lapses doesn't vanish on the spot. Microsoft takes a subscription that has ended through Expired, then Disabled, then Deleted. While it's Expired, your team still has normal access. Once it's Disabled, users can't get into the apps and only admins can reach the data. One caveat: Microsoft says that since 9 February 2026 the Expired step no longer applies to subscriptions bought directly on a Microsoft Customer Agreement, so don't count on it. Update your card under Billing → Bills & payments → Payment methods as soon as you notice a problem.

Can I get Microsoft 365 at a nonprofit discount?

Yes, but check what's actually on offer now — this changed in 2025. Microsoft grants eligible nonprofits up to 300 free Microsoft 365 Business Basic licenses, plus discounts of up to 75% on many of its paid nonprofit offers, including Business Standard and Business Premium. The older free Business Premium grant and the free Office 365 E1 grant have both been discontinued, and existing licenses under them expire at the next renewal rather than renewing. If you're on one of those, you need to move users over manually in the admin center. Check eligibility at Microsoft Nonprofits.

Need a hand?

If you're stuck, email support@chykalophia.com and we'll help. Include your website address and a screenshot if you can.