Microsoft 365 Pricing Update: What’s Changing and How to Prepare Before July 2026

Last week, Microsoft announced major updates to Microsoft 365 that will reshape how organisations use productivity and security tools. These updates introduce advanced AI capabilities, stronger security, and improved management features - but they also come with price increases starting July 1, 2026 some which will hike as much as 33%. This blog post set outs the change and helps you plan ahead.

What are the price changes?

These price increases are for any contracts signed after July 1, so those organisations that renew before that data will defer price increases and be able to take advantage of some new features.

Microsoft is adjusting pricing across several plans:

• Business Plans
  • Business Basic → $7/user/month(↑16.7%)
  • Business Standard → $14/user/month(↑12%)
• Enterprise Plans
  • Microsoft 365 E3 → $39/user/month(↑8.3%)
  • Microsoft 365 E5 → $60/user/month(↑5.3%)
• Frontline Plans
  • Microsoft 365 F1 → $3/user/month(↑33%)
  • Microsoft 365 F3 → $10/user/month(↑25%)

Copilot Add-on: Still $30/user/month, not included in base plans.

Frontline plans: The sharpest impact

Frontline plans - popular for retail, manufacturing, and healthcare - see the steepest increases (up to 33%). This will create several impacts. Organizations with large frontline workforces will feel the most pressure. Also, seasonal and part-time staffing costs may rise, affecting flexibility.

Nonprofit and US Government Microsoft customers will experience price increases proportional to their current list price. Worldwide education customers are not currently impacted by this latest price increase or provided with associated additional features.

Copilot Everywhere

Copilot is now embedded across Word, Excel, PowerPoint, Outlook, and Teams. 

• In Word and PowerPoint: Generate first drafts, summarize documents, and create presentations in minutes.
• In Excel: Analyze data, build formulas, and create charts without manual effort.
• In Outlook: Draft emails, summarize long threads, and manage your inbox faster.
• In Teams: Turn meeting transcripts into action items and summaries instantly.

These capabilities save time and reduce repetitive tasks, making AI a core part of daily workflows. From creating proposals and analysing data to budget forecasting and helping with meeting preparation. And with Copilot Chat which adds pay-as-you-go agents, giving users quick access to answers and making them more efficient.

Security Copilot accelerates incident analysis, connects data across Microsoft security tools for full risk context, and recommends or automates response actions while enabling proactive threat hunting; while Copilot Control System centralises policy management, enforces compliance, customises experiences and provides analytics and audit trails for visibility and control.

Outlook and Office apps now include URL checks for Business Basic and Standard, and Business Basic, Standard, and Premium plans gain an additional 50GB of email storage for a total of 100GB.

What do these changes mean for you

Even though the implementation of these changes may seem a while away, July 2026 will be here before you know it. The impact of higher licencing costs needs to be taken into account now. Other considerations such as deciding which plans and add-ons make sense, as well as what plans you need to make for AI adoptions and security upgrades, should be taken into account early on in the renewal process.

We recommend taking the following actions as soon as possible: 

• Review current Microsoft licencing and usage across the organisation
  Map what you own versus what you actually use, identify under-utilised licences, and ensure entitlements align with business needs and growth plans. 
• Evaluate Copilot adoption and ROI
  Assess where Copilot is already delivering value, where additional enablement is needed, and how expanding usage could improve productivity, security posture, or operational efficiency. 
• Plan for cost optimisation now
  Develop a proactive budgeting model that accounts for upcoming price changes, explores plan right-sizing opportunities, and leverages automation and governance to maximise return on spend. 
• Engage early

If you make an early commitment on terms, product mix and quantities you may still be able to keep the same renewal and payment date. Alternatively, you could look into renewing early and get credit pro-rated for the rest of your existing agreement.  

Ultimately, it’s about engageing your Microsoft Licensing Services partner early to help you model the different impacts for different scenarios. You need to understand what is viable and makes sense for your organisation.