Thank you for reaching out!
It looks like that you had already used up all the seats which were currently available to you, the way a user seat/space works is once you add a user, the seat gets used up so now you want to remove an inactive user to add another user, you need to simply replace the inactive users email address with the new user email address and then send a password reset link.
Removing a user does not free the space for a new user as once we add a user, the space is used up.
Screenshot to replace a user - https://monosnap.com/file/TNkHSmegsCmzkruLnNlOxlJVl9JZFc