Microsoft has officially raised prices for its Microsoft 365 business subscriptions as of July 1, 2026. The increase, which was first announced in December 2025, affects Business, Enterprise, Frontline, and Government suites. Microsoft describes this change as a “packaging and pricing update” rather than a simple cost increase, citing the addition of new AI, security, and IT management capabilities.
For individual consumers and educators, there is good news: Microsoft 365 Personal and Education pricing remains unchanged. However, organizations managing Microsoft 365 tenants should expect higher renewal bills. If you renewed your subscription before July 1, your current rate holds until your next renewal cycle, though you will still receive the newly bundled features.
How much are prices increasing?
The price adjustments vary significantly across different plans. Some SKUs see modest bumps, while others face steep increases. Here is the breakdown of the new monthly per-user costs:
- Microsoft 365 Business Basic: Increases from $6 to $7 (16% hike).
- Microsoft 365 Business Standard: Rises from $12.50 to $14 (12% hike).
- Microsoft 365 Business Premium: Remains flat at $22.
- Office 365 E3: Increases from $23 to $26 (13% hike).
- Office 365 E5: Rises from $38 to $41 (8% hike).
- Microsoft 365 E3: Increases from $36 to $39 (8% hike).
- Microsoft 365 E5: Rises from $57 to $60 (5% hike).
- Office 365 E1: Remains unchanged at $10.
The Microsoft 365 F1 plan for frontline workers sees a 33% increase, jumping from $2.25 to $3 per user. The F3 plan rises 25%, moving from $8 to $10. If you opt for versions of these plans without Microsoft Teams, the increases are even steeper: F1 without Teams jumps 43%, and Business Basic without Teams climbs 23%.
Standalone add-ons and enterprise licensing
Standalone licenses and add-ons are also seeing significant price adjustments. Windows Enterprise per-device licensing increases by 31%, rising from $5.85 to $7.63. This comes at a time when hardware costs, including RAM, are already climbing for companies budgeting new PCs.
Microsoft 365 Apps per device sees a 17% increase, moving from $36 to $42. Other enterprise security and identity products like Entra Plan 1 and EMS E3 also face double-digit percentage increases. Government customers on GCC, GCC High, and DoD clouds see similar percentage bumps, though US AGC pricing remains untouched. Any government increase above 10% is phased in over several years to comply with federal regulations.
New features bundled into higher tiers
Microsoft states that the price hikes reflect the inclusion of previously separate add-ons and new AI capabilities. Key additions include:
- Security Enhancements: Office 365 E3 and Microsoft 365 E3 now include Microsoft Defender for Office 365 Plan 1. Lower-tier plans like Office 365 E1, Business Basic, and Business Standard gain URL time-of-click protection.
- IT Management Tools: Microsoft 365 E3 and E5 tenants receive Intune Remote Help, Intune Advanced Analytics, and Intune Plan 2. E5 customers additionally get Intune Endpoint Privilege Management, Microsoft Cloud PKI, and Enterprise Application Management.
- AI Copilot Integration: The biggest addition for E5 users is Microsoft Security Copilot, included at 400 Security Compute Units per month for every 1,000 licenses (capped at 10,000 SCUs). All affected suites also receive Copilot Chat enhancements, including inbox and calendar awareness.
- Storage Boost: Business Basic and Standard users get an extra 50GB of mailbox storage.
The packaging changes began in June 2026 and are expected to be complete by August 1, 2026. Microsoft will send a 30-day notice via the Message Center. Nonprofits, which already receive a 60-75% discount off commercial rates, will see their bills move in lockstep with these commercial price increases.
Source: Windows Latest
Over to you: Does the inclusion of Copilot and security tools justify the price increase for your organization, or will you look for alternative solutions?
