Major Changes to Microsoft’s Nonprofit Licensing

Big changes have come to Microsoft’s nonprofit licensing. Starting July 1st 2025, Microsoft will phase out several grant-based licenses and introduce a new billing and pricing model for nonprofit organisations. Whether you rely on Microsoft 365, Azure or on-premises software, now is the time to review your setup and understand these major changes.

In this article, Optimising IT is here to explain these changes and what they mean, including updates on costs, what’s no longer available and the steps your nonprofit will have to take to transition.

Major Licensing Changes Are Here for Nonprofits – What’s Changing and Why It Matters:

The Microsoft Cloud has long offered affordable access to powerful tools for nonprofits. But as demand for cloud-based services grows, Microsoft is making nonprofit software grant changes to align more closely with commercial licensing. This shift includes major grant cuts, pricing updates and new billing requirements. Without a plan, your charity could face steep costs or service disruptions at renewal.

Annual Prepaid Billing

Microsoft will now require an annual upfront payment for most discounted charity licenses. Organisations choosing monthly billing will pay a premium – up to 20% more than annual rates. In the UK, this pricing model applies across Microsoft 365 and Dynamics products, with annual billing becoming the norm for those looking to maintain lower rates.

Microsoft 365 Price Updates for Nonprofits

Microsoft’s nonprofit licensing changes in 2025 mean there will be alterations to prices. Here are the key price updates:

• Microsoft 365 Business Premium: Approximately £4.20 per user/month with an annual commitment
• Office 365 E1: Around £2.50 per user/month on annual terms
• Office 365 E3: Approximately £5.80 per user/month
• Office 365 E5: Around £15.20 per user/month

It’s important to detail the changes with Microsoft Teams licensing, as this is now licensed separately. Nonprofits requiring Teams Phone capabilities should anticipate additional charges.

Major Grant Changes You Need to Know

Microsoft is making some of its most significant nonprofit grant reductions to date, signalling a wider shift toward cloud-based services and subscription models. If your organisation relies on grants for tools like Azure or Dynamics 365, these updates could have a direct impact on your operating costs and IT planning.

• Azure Grant Reduction: The annual Microsoft Azure grant will be reduced from £2,800 to £1,600. This will impact nonprofits and charities relying on Azure for hosting, storage or infrastructure. If your usage exceeds the new cap, you’ll need to cover the shortfall or scale back services accordingly.
• End of Dynamics 365 Sales Enterprise Grant: Microsoft will no longer offer the free Dynamics 365 Sales Enterprise licenses to nonprofits. Moving forward, charities that rely on Dynamics for donor management or CRM will need to purchase discounted seats.
• Retirement of On-Premises Donation Programmes: Microsoft is also ending its on-premises software donation programme entirely. Classic tools like Office Standard and Windows Server will no longer be offered as free donations, reinforcing Microsoft’s strategic push towards cloud-based solutions.

What This Means for Your Charity’s Tech

Nonprofits still using legacy systems will face new challenges. On-premises solutions are being phased out, and cloud migration is no longer optional for many. This means nonprofit organisations must plan, manage and secure their digital infrastructure in new ways. Nonprofits still relying on legacy or on-premises systems will face increasing operational pressure, and the move introduces a new layer of complexity. The shift requires stronger cost forecasting, license tracking and a sharper focus on security and compliance.

Take Action Before Your Renewal Date

Microsoft’s nonprofit software grant changes only apply at the point of license renewal, but reviewing your current set up now gives you time to plan, budget and explore discounts rather than face last-minute decisions and unexpected charges.

Need Help Navigating These Changes?

Optimising IT is here to help support your nonprofit regarding Microsoft charity licensing changes starting June 1st 2025. Our team conducts Microsoft 365 licensing audits to find the best cost-saving recommendations, support your cloud migration, manage costs for systems like Azure and help tailor strategic plans for your charity’s goals and budget. Get in touch with Optimising IT to futureproof your tech and maximise your Microsoft benefits.