How to Find Unused Microsoft 365 Licences You Are Paying For

That last step has conditions. Microsoft limits when you can reduce seats, so read step 7 before your next renewal.

Unused seats cost real money. These examples use Microsoft's UK list prices on 22 October 2026, per user per month, excluding VAT, on an annual plan paid yearly:

• Five unused Business Basic seats at £5.40 cost £27 a month, or £324 a year.
• Three unused Business Premium with Copilot seats at £24.60 cost £73.80 a month, or £885.60 a year.

You need the right admin role. Microsoft says you must be at least a License Administrator or User Administrator to assign licences. Changing the subscription needs a billing role, and which one depends on your billing account type.

Step 1: Compare licences bought with licences assigned

Go to Billing > Licenses. Microsoft says this page shows how many licences you have assigned and unassigned. You keep paying for unassigned seats until you remove them from the subscription.

• The page can add up several subscriptions for the same product. Billing > Your products shows each subscription on its own row.
• Users > Active users shows who is licensed, unlicensed or a guest.

Step 2: Spot leavers who still hold a licence

Compare the licensed accounts on Users > Active users with your leaver list from HR or payroll. Include contractors, temps and old test accounts.

For each leaver, block sign-in first. Select the user, then Block sign-in. On the Block sign-in page, choose Block this user from signing in and select Save changes. Decide what happens to their email and files before you remove the licence.

Step 3: Check the usage reports

Go to Reports > Usage. Select Microsoft 365 apps, then open the Active users tab. The table lists each user's last active date for Exchange, OneDrive, SharePoint and Microsoft Teams. Select Export to sort it in Excel.

Use the 90 or 180 day view and look for people with no recent activity in any service. Three cautions:

• User names are hidden by default. A Global Administrator can show them under Settings > Org Settings. On the Services tab, select Reports and clear Conceal user, group, and site names in all reports.
• Reports typically become available within 24 to 72 hours, so very recent activity may be missing.
• Someone on long leave can look inactive. Ask their manager before you act.

Step 4: Check last sign-in in Microsoft Entra

Sign in to the Microsoft Entra admin center as at least a Reports Reader. Then:

1. Go to Entra ID > Users.
2. Select Manage view, then Edit columns.
3. Select + Add column, choose Last interactive sign-in time, then select Save.
4. Select Add filter, set the operator to "less than or equal to" and pick a date, such as 90 days ago.

You now have the accounts whose last sign-in was on or before that date. Check any blank dates separately. Microsoft says 90 to 180 days is a reasonable inactive window for many organisations. Inactive accounts are also a sign-in risk, so see our Microsoft 365 security checklist for what else to check.

The date can be blank if the account never signed in. It counts interactive sign-ins only, and can take up to 24 hours to update. For one person's detail, open Entra ID > Monitoring & health > Sign-in logs. Those logs keep seven days on Entra ID Free and 30 days on P1 and P2, so use them for spot checks.

Step 5: Check shared mailboxes

A shared mailbox can hold up to 50 GB without a licence. Microsoft says it needs one when the mailbox:

• Holds more than 50 GB. Exchange Online Plan 2 raises the limit to 100 GB.
• Uses in-place archiving. That needs Exchange Online Plan 2, or Plan 1 with the Exchange Online Archiving add-on.
• Is placed on litigation hold. The same licences apply.

Advanced features such as Microsoft Defender for Office 365, eDiscovery (Premium) or retention policies might need licences too.

Open Teams & Groups > Shared mailboxes to list them. To remove a licence, select the shared mailbox on Users > Active users. You cannot do it from the Shared mailboxes page. On the Licenses and Apps tab, expand Licenses, clear the box and select Save changes. The status then shows Unlicensed.

To keep a leaver's email, select the user and open the Mail tab. Choose Convert to shared mailbox, then Convert. The mailbox needs a licence before you convert it. Afterwards, remove the licence only if the mailbox is under 50 GB and does not use in-place archiving or litigation hold. Do not delete the account, because the shared mailbox needs it.

Step 6: Unassign the licences

Use either route:

• Billing > Licenses: select the product, tick the users, then select Unassign licenses.
• Users > Active users: select the user, open Licenses and Apps, clear the licence boxes and select Save changes.

For several users on Active users, select them, choose Manage product licenses, then Unassign all and Save changes.

Take care here. When you remove a licence, Microsoft holds the user's Exchange Online data for 30 days, then deletes it with no recovery. The user's OneDrive becomes read-only after 60 days without a licence and is archived after 93. Save leaver mail and files first.

Step 7: Reduce the licence count on your subscription

Unassigning a licence does not lower your bill. You must also reduce the subscription quantity:

1. Go to Billing > Your products. In the Simplified view, select Subscriptions instead.
2. Select the subscription, then Remove licenses.
3. Enter the new total in the Total licenses box under New quantity, then select Save.

Microsoft sets three conditions. You cannot reduce seats if every licence is assigned, so unassign first. Remove licenses works only while recurring billing is on. If you bought through a reseller or a Microsoft representative, the buttons may be unavailable and your seller makes the change.

The mid-term rules depend on your billing account type. Check it under Billing > Billing accounts in the Billing account type column. On a Microsoft Customer Agreement account, Microsoft says you can remove licences only within seven days of buying or renewing, or of buying extra licences. If that window has closed, the subscription page shows the date your plan changes take effect.

Microsoft describes a prorated invoice adjustment for older Microsoft Online Subscription Agreement accounts. For those and any other arrangement, check your subscription terms.

Two practical tips:

• On a Microsoft Customer Agreement, diary your renewal date and make the cut inside the seven days after it.
• Do not switch off recurring billing to cut seats. Microsoft says this cancels scheduled changes, and the subscription then expires unless you pay manually.

How cloud365.io can help

Our Microsoft 365 audit includes licence waste and needs only read-only admin access, so you get a written list of seats to remove. If you would rather buy or manage licences through us, see our pricing. Not sure everyone is on the right plan? Compare Business Basic, Standard and Premium.