New Commerce: when you can cancel or reduce a Microsoft 365 subscription, and when you cannot

The rules changed in 2022 and people are still being surprised by them. Under Microsoft’s New Commerce Experience a subscription is a commitment, and the moment you can change your mind is short. Here is exactly what you can and cannot do, when, and the two mistakes that cost real money.

The three terms

Monthly, no commitment. Renews every month. Cancel or reduce seats any month, at the anniversary. Priced roughly twenty percent above the annual rate. The right term for anything you are not sure about: a pilot, a seasonal team, a subsidiary you might sell.

One year. Committed for twelve months. Priced at the base rate. You can pay annually up front or monthly — monthly billing on an annual term costs a little more than paying up front, and it is still a commitment: stopping the payments does not end the term.

Three years. Committed for thirty-six months at a further discount. Available on a subset of SKUs. Rarely the right answer for anything you cannot forecast three years out, which for most companies is everything.

The cancellation window

On any term you can cancel within the first seven days after purchase or renewal and receive a pro-rated refund. Day eight, the commitment is binding. The same seven days apply at each renewal — which matters, because renewals are automatic.

That is the whole rule. There is no exception for a change in circumstances, no goodwill cancellation because the company shrank, and your partner cannot override it: it is Microsoft’s term, applied whoever sold the subscription.

Adding and reducing seats

Adding is always possible, on any term, at any time. The new seats join the existing term and are pro-rated to its end date.

Reducing depends on the term. Monthly: reduce at any monthly anniversary. Annual and three-year: reduce only at renewal, or within the seven-day window after adding seats (you can back out an addition, not the base). Between those points the seat count is fixed even if the people are gone.

This is the mechanic behind the practice we recommend most: put the headcount you are certain of on an annual term and everything uncertain on monthly. Commitment is set per subscription, not per tenant, so a company can hold Business Premium on both terms at once.

What happens at expiry

Auto-renew is on by default. If you do nothing, the subscription renews for the same term at the then-current price, and the seven-day window opens again. Turn auto-renew off in the admin centre or ask your partner to, and at expiry the subscription stops.

Then the grace period. Historically, an expired subscription entered a period of reduced functionality followed by a period where data was retained but inaccessible, before deletion. In 2026 Microsoft has been replacing the free post-expiry grace period for partner-sold subscriptions with a paid Extended Service Term. The practical point is unchanged: know your renewal dates, decide before them, and do not rely on a grace period for anything you care about.

Changing SKU mid-term

You can upgrade mid-term — Business Standard to Business Premium, E3 to E5 — and the new subscription usually inherits the remaining term. You cannot downgrade mid-term: E5 to E3 waits for renewal. If you have too much E5, the fix is to stop paying for it at renewal, not to try to cancel it now.

The two expensive mistakes

Buying annual for a headcount that is about to fall. Thirty seats on a one-year term, then a restructuring takes twelve people out in month four. Those twelve seats are paid for eight more months. The saving from the annual rate was twenty percent; the waste is forty percent of a year on twelve seats. Monthly would have been cheaper.

Missing the renewal. The annual subscription renews on the day it renews, for another year, at whatever the price is that day. The seven-day window to reverse it is easy to miss without a calendar entry — and if your partner is not reminding you a month ahead, that is a data point about your partner.

What to do this week

Export the subscription list with renewal dates and terms. In the admin centre it is under Billing → Your products; your partner can also send it. Put every renewal date in a calendar with a reminder six weeks before. For each subscription, ask whether the seat count will hold for the rest of the term. Where it will not, note the renewal date as the point to move those seats to monthly.

That is the entire discipline. It takes an hour, and on a tenant of a few hundred seats it is usually worth more than any discount a reseller can offer.