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
You manage all billing from Billing → Subscriptions in the Microsoft 365 admin center. You're charged per user per month (or year). You can add licenses at any time. Removing licenses usually takes effect at the next renewal date. Microsoft sends invoices by email and stores them in the admin center.
Where to find your billing
Sign in to the admin center at admin.microsoft.com.
Click Billing in the left-hand navigation.
You'll see sub-sections: Subscriptions, Your products, Bills & payments, and Purchase services.
Understanding your subscription
Go to Billing → Your products to see your active subscriptions. For each one, you'll see:
- The plan name (for example, Microsoft 365 Business Standard)
- Number of licenses purchased
- Number of licenses assigned (in use)
- Next renewal date
- Price per license per month/year
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.
Click the subscription you want to add a license to.
Click Add more licenses or adjust the quantity field upward.
Confirm the purchase. The new license is available immediately for assigning to a user.
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.
Click the subscription and find the option to reduce the license count.
Reduce the number to reflect your current team. Note that this typically takes effect at the next billing cycle, not immediately.
Make sure no one is assigned to the license before removing it
You can't remove a license that is still assigned to a user. First unassign the license from the user (or delete the user), then reduce the license count.
Finding and downloading invoices
Go to Billing → Bills & payments.
Click any invoice to view the details.
Click Download invoice to save a PDF copy. You can then forward it to your accountant or bookkeeper.
Updating your payment method
Go to Billing → Bills & payments → Payment methods. From here you can:
- Add a new credit or debit card
- Remove an old card
- Set a default payment method for automatic renewal
Monthly vs annual billing
| Monthly | Annual | |
|---|---|---|
| Commitment | None — cancel anytime | 12-month commitment |
| Cost | Higher per month | Lower per month (typically 10–20% saving) |
| Flexibility | Add/remove licenses freely | Reduce licenses only at renewal (in some plans) |
If your team is stable and you plan to use Microsoft 365 long-term, annual billing is usually the better value.
Common questions
Related guides
- Microsoft 365 plans explained
- Adding a user in Microsoft 365
- Removing a user safely
- The Microsoft 365 admin center, explained
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