A guide to the latest Microsoft 365 licensing cost adjustments

Microsoft 365 is getting a price increase. Announced in December 2025 and effective July 1, 2026, the update affects a broad range of commercial, nonprofit, and government subscriptions, from Business Basic to Enterprise E5. It also introduces changes to the features includes in some plans. If your organization relies on Microsoft 365 for email, productivity, or security, here’s what the update actually means and what you should do about it.

What’s changing and when

The Microsoft 365 pricing update took effect on July 1, 2026 for new and renewing customers. Existing customers remain on their current pricing until renewal, at which point the new rates apply. Microsoft will provide at least 30 days’ notice through the admin Message Center before packaging changes are rolled out to a tenant, with full deployment expected by August 1, 2026.

Business plan increases

For small and mid-size businesses, the increases are meaningful. Microsoft 365 Business Basic moves from $6.00 to $7.00 per user per month — a 16% increase. Business Standard rises from $12.50 to $14.00 (12%), while Business Premium holds at $22.00. On the no-Teams versions, Business Basic (no Teams) increases 23% from $4.40 to $5.40, and Business Standard (no Teams) rises 16% from $9.29 to $10.79.

Business Basic and Standard subscribers also receive a packaging addition: an extra 50 GB of email storage and URL time-of-click protection, which checks links at the moment a user clicks rather than at delivery. Business Premium subscribers get the extra 50 GB as well.

Enterprise plan increases

Enterprise plans see more varied increases. Office 365 E3 rises 13% to $26.00 per user, per month, and Microsoft 365 E3 increases 8% to $39.00. Office 365 E5 goes from $38.00 to $41.00 (8%), and Microsoft 365 E5 from $57.00 to $60.00 (5%). Office 365 E1 holds at $10.00 with no price change.

On the packaging side, E3 subscribers gain Microsoft Defender for Office 365 Plan 1, providing advanced protection against phishing and malicious attachments. Microsoft 365 E3 additionally receives Intune Remote Help, Intune Advanced Analytics, and Intune Plan 2. Meanwhile, E5 subscribers gain the full E3 additions plus Microsoft Security Copilot, Intune Endpoint Privilege Management, Microsoft Cloud PKI, and Intune Enterprise Application Management.

Frontline and standalone changes

Frontline plans see the steepest percentage increases in the update. Microsoft 365 F1 rises 33% from $2.25 to $3.00, and F3 increases 25% from $8.00 to $10.00. Both plans receive Copilot Chat enhancements and Copilot Chat Analytics as part of the packaging update.

Several standalone components are also increasing. Microsoft 365 Apps moves from $12.00 to $14.00 (17%), Windows E3 rises from $6.63 to $7.63 (15%), Apps for Business increases 21% to $10.00, and Entra Plan 1 goes from $6.00 to $7.00 (16%). Windows Enterprise per device sees the largest standalone increase at 31%, from $5.85 to $7.63.

Existing customers stay on current pricing until renewal, but that window won’t last indefinitely. Reviewing your renewal date now gives you the most time to evaluate options.

Government and nonprofit pricing

Government and nonprofit pricing adjusts in line with commercial rates. Nonprofit plans carry a fixed percentage discount off commercial pricing (typically 60% to 75%). This means the dollar increase is proportionally smaller but the percentage change mirrors commercial rates.

For government customers, Microsoft notes that suites with total price increases exceeding 10% will be phased over multiple years in accordance with federal procurement regulations.

What organizations should do now

The most practical first step is to check your renewal date. If you’re renewing in the next few months, you’ll want to understand exactly which plan tier you’re on, what the new per-user cost will be at scale, and whether the added features are worth the higher price.
It’s also worth reviewing whether your current plan tier still fits your actual usage. Organizations that have added or lost users, shifted workloads, or changed their security posture since their last renewal may find that a different plan — or a restructured licensing agreement — makes more financial sense than simply rolling into the new pricing at the same tier. For the complete list of price updates, refer to Microsoft’s Pricing and Packaging Updates page.

Not sure how the Microsoft 365 pricing update affects your organization’s renewal? Our team can review your current licensing, model the cost impact, and help you make the most of what’s already included in your plan. Reach out and we’ll take a look.