How do I save money on Microsoft 365 (Office 365)?

The short answer: most savings come from four things: removing licences from people who've left, putting each person on the plan they actually need, paying annually instead of monthly, and cancelling add-ons you're already getting elsewhere. A typical small business can do all four in an afternoon, and the right timing (your renewal date) matters more than anything else.

1. Take licences back from people who've left

When someone leaves, their account is often blocked but their licence keeps running, and you keep paying for it every month.

• Check Users > Active users in the Microsoft 365 admin centre for people who no longer work for you.
• If you need to keep their email, convert their mailbox to a shared mailbox. Shared mailboxes up to 50 GB don't need a licence, so you can remove it and still keep (and read) everything.
• Give the spare licence to your next starter instead of buying a new one.

2. Put each person on the plan they need

You don't have to put everyone on the same plan. Plans can be mixed:

• Business Basic suits people who only need email, Teams and Office in a web browser or on their phone.
• Business Standard adds the full desktop apps (Word, Excel, Outlook) on up to 5 computers each.
• Business Premium adds proper security and device management.

Someone on Premium who only reads email on their phone could often move down. Just as often, the bigger risk is the other way round: a business on Basic with no protection on its accounts. See Which Microsoft 365 plan do I need?

3. Pay annually, not monthly

Microsoft charges 20% more for licences on a monthly term than for the same licence on a yearly term. If your number of staff is fairly steady, switching to annual is one of the quickest savings there is.

The trade-off: on a yearly term you can add licences any time, but you can only reduce the number at renewal. A common approach is annual licences for your core staff and a few monthly ones for people who come and go.

4. Cancel the add-ons you don't need

Look for things you're paying for twice:

• Teams Essentials or a separate meeting tool, when Teams is already in your Microsoft 365 plan.
• Separate file sharing (such as Dropbox), when OneDrive and SharePoint come with your plan.
• Extra email-only licences for shared addresses like info@ or accounts@. These should usually be shared mailboxes, which are free.

5. Time your changes to your renewal date

Yearly licences can only be reduced in the short window when they renew (and Microsoft only allows cancelling within 7 days of a purchase or renewal). Find your renewal date under Billing > Your products and put a reminder in your calendar a month before. That's when to tidy up.

6. Check who you're buying from

Microsoft sells directly, but most businesses buy through an IT company (a "Microsoft partner"). Prices vary between suppliers, and some charge well above Microsoft's list price, or bundle licences into a bigger monthly bill where you can't see the cost. It's worth comparing.

7. Get someone to look for you

If you'd rather not dig through the admin centre, our free Microsoft 365 audit checks your licences, plans and billing and tells you exactly where the savings are, along with any security gaps. You can see a sample report first.

Common questions

Is Office 365 the same as Microsoft 365?

Yes, for most small businesses. Microsoft renamed most Office 365 business plans to Microsoft 365 in 2020. If you're paying for "Office 365", the same savings apply.

Can I get a refund on licences I'm not using?

Usually not for the time already paid. On yearly licences you can only reduce the number at renewal, or within 7 days of buying them. That's why it pays to check before your renewal date.

Will removing a licence delete someone's email?

Removing a licence starts the clock on deleting that mailbox's data, so do it in the right order: convert the mailbox to a shared mailbox first (or move the email somewhere safe), then remove the licence.

How much could a small business save?

It depends entirely on your setup. As a rough example, four unused Business Standard licences cost about £620 a year including VAT. Try the savings calculator for a quick estimate.