In April 2025, Microsoft introduced important updates to its commercial licensing pricing model. These changes impact organisations using Microsoft 365, Dynamics 365, and Power Platform services.
The most notable shift is a new 5% premium on annual subscriptions paid monthly, making upfront annual payments the most cost-effective option. In this article we break down the key updates, pricing implications, and what businesses should consider to optimise their Microsoft licensing strategy.
Monthly billing on annual licenses costs 5% more
From April this year any annual-term subscription billed monthly (e.g., Microsoft 365, Office 365, Dynamics 365, Windows 365, Power Platform) will face a 5% price premium versus paying the full amount upfront.
- This applies across purchasing channels—Buy Online, CSP, and Microsoft Customer Agreement (MCA‑E)
- It impacts both new purchases and renewals of such plans
- This change will affect all industries commercial, nonprofit, education and government
Why the change?
Microsoft aims to standardise billing structures globally, reward upfront commitment and maintain pricing consistency across its offer models. The current pricing tiers organisations will see:
| Plan Type | Price Compared to Annual Upfront |
| Annual commit & upfront payment | Base price (cheapest) |
| Annual commit, paid monthly | Base price + 5% premium |
| Monthly term subscription (no commit) | ~20% premium (already existed) |
Standalone Teams Phone & Power BI price increases
Microsoft has also increased standalone product prices (not bundled in E5/E3 suites)
- Teams Phone Standard: £7.70 per user/month
- Teams Phone Frontline: £4.83/month (12-month contract) or £5.52 (monthly)
- Power BI Pro: £10.80 per user/month (annual billing)
- Power BI Premium Per User: £18.50 per user/month (annual billing)
This significantly impacts teams using standalone licensing.
Copilot licensing remains premium
Since the 1st of December 2024, Microsoft’s Copilot services (e.g., Copilot, Copilot for Sales/Service) offered a monthly billing option on annual plans, but at a 5% premium. From April, this pricing policy applies universally across additional workloads.
How can you optimise costs?
- Switch to upfront annual billing – avoid the new 5% surcharge.
- Bundle where possible – standalone Teams Phone/Power BI in E5/E3 might hold off price increases.
- Leverage promotions – 15% discount on E3/E5 and Copilot licenses available through June 30, 2025
- Rationalise usage – assess active users and leverage capacity-based platforms like Fabric for Power BI.
What this means for your budget
When it comes to your budget the annual upfront remains the most cost-efficient path. Monthly payments on annual commitments now carry a slight premium. It is recommended to consider paying upfront if your cash flow allows. Month-to-month licenses maintain their flexibility for a price (20% premium). Standalone services like Teams Phone and Power BI are now significantly more expensive.
Next steps
If you haven’t yet locked in upfront annual billing, we recommend you reassess whether standalone services offer the best value post-increase. Act quickly as promotions end June 2025, and renewals fall soon.
If you’re looking for help adapting your licensing strategy or need help understanding the new licensing tiers, contact our team who can help.
