Microsoft 365 price rise July 2026: what UK businesses need to do now

What's actually changing in July 2026

From 1 July 2026, Microsoft is increasing prices across its commercial Microsoft 365 plans in the UK. The two tiers most businesses sit on are taking the biggest hits:

• Business Basic rises from £4.90 to £5.75 per user per month – an increase of 17.3%.
• Business Standard rises by approximately 12%.

This isn't an isolated adjustment. Microsoft is restructuring its entire commercial licensing model alongside a deliberate push to integrate Copilot – its AI assistant – into the product family. The price changes partly reflect investment in that AI layer and partly reflect a broader realignment of what each tier includes.

The deadline matters because the window to lock in current pricing via early annual renewal closes on 1 July. If your renewal date falls after that, you'll pay the new rate unless you act before the cutover.

Which plan is right for your business now

The price gap between Business Standard and Business Premium has been narrowing for some time. With the July increases applied, it's worth recalculating whether Business Premium is now better value for your organisation than it appeared 12 months ago.

Business Premium includes everything in Standard plus Microsoft Defender for Business, Intune device management and Azure AD Premium P1. If you're paying separately for any endpoint security tool or MDM solution, the combined cost may already exceed what Premium charges. Run the numbers before assuming your current plan is still the right one.

The broader question is whether your licences are correctly matched to what your team actually uses. Many businesses are paying Standard rates for users who only need Basic – email, Teams and lightweight document collaboration. Mapping licence tier to actual usage, rather than assigning everyone the same plan for simplicity, can absorb a significant part of the price increase before it lands.

The ghost licence problem – audit before July

Ghost licences are assigned Microsoft 365 seats that aren't being used. They accumulate in three main ways: staff who've left but whose accounts weren't deprovisioned, duplicate accounts created during migrations or IT changes and licences assigned to shared mailboxes or distribution lists that don't need a full seat.

In SMEs we audit, ghost licences typically represent 15–30% of the total licence count. At Business Standard rates, 10 ghost licences cost around £1,500 a year before the July increase. After it, more.

An audit before July means you're applying the new prices to a clean, accurate list – not to a swollen count that's been inflating your bill quietly for months. The process is straightforward: pull a licence assignment report from the Microsoft 365 admin centre, cross-reference it against your active employee list and remove anything that doesn't match a current, active user with a genuine need for that tier.

Don't overlook shared mailboxes. A shared mailbox doesn't require a full licence in most configurations – if yours are on paid seats, that's a quick saving.

Annual vs monthly: the commitment question

Microsoft 365 licences can be billed monthly or committed annually. The annual commitment is cheaper per seat – that's been the case for some time. But many businesses end up on monthly billing either because they started that way and never switched or because they wanted flexibility during a period of growth or uncertainty.

The July increase makes this decision more pressing. If you're on monthly billing now, switching to an annual commitment before 1 July locks in the current pricing for the length of that term. You won't just avoid the increase – you'll also take the lower annual rate instead of the higher monthly one. That's a double saving.

The trade-off is flexibility. An annual commitment means you're committing to a fixed licence count for 12 months. If your headcount drops, you'll still pay for the seats you've committed to. For most businesses with a reasonably stable team, this is an acceptable trade. For those in a period of active contraction, it's worth modelling.

If you're already on an annual plan, check your renewal date. If it falls after 1 July, speak to your reseller about whether an early renewal is possible. Most Microsoft licensing partners can facilitate this before the deadline.

Is Copilot worth adding now?

Microsoft Copilot for Microsoft 365 is the AI assistant that sits across Teams, Outlook, Word, Excel and the rest of the suite. It's available as a paid add-on and Microsoft is actively encouraging adoption alongside these price changes – the two moves are clearly linked.

Whether it's worth adding depends on how your team works. Copilot has genuine utility for people who spend significant time in meetings, writing documents or summarising email threads. For users whose Microsoft 365 usage is light – basic email and occasional file access – the add-on cost is hard to justify.

The honest answer is that most businesses should pilot it with a small group before rolling it out. Pick five to ten people whose work involves heavy document production or meeting-heavy schedules, run a 90-day pilot and measure whether it's saving them meaningful time. That's a more reliable basis for a decision than vendor-supplied productivity statistics.

Don't let the July pricing pressure push you into adding Copilot before you've assessed whether you'll actually use it. The deadline applies to your core licensing – the Copilot decision can be made separately.

What to do before the deadline

Four actions, in order of priority:

1. Audit your current licences. Pull the licence assignment report from the Microsoft 365 admin centre today. Remove ghost accounts. Downgrade users on Standard who only need Basic. Go into July paying for what you actually use.

2. Switch from monthly to annual billing before 1 July. If any of your licences are on monthly billing, switch them to annual before the cutover. You'll lock in current pricing for 12 months and take the lower annual rate at the same time.

3. Check your annual renewal date. If it falls after 1 July, talk to your Microsoft reseller about an early renewal. This is a standard request and most partners will accommodate it.

4. Review whether Business Premium is now better value than Standard. With the gap narrowing, run a comparison that includes any security or device management tools you're paying for separately. The answer may surprise you.

None of this is complicated, but it does require someone to own it before July arrives. The businesses that act early will spend less. Those that don't will absorb the full increase on a licence count that may not reflect what they actually need.