Microsoft 365 Price Increase 2026: What Small Businesses Will Actually Pay

Microsoft raised Microsoft 365 business prices on July 1, 2026. If your renewal has not come up yet, you are still paying the old rate — and that gap is the only part of this you can actually do something about.

Here is what changed, what it costs a real 25-person company, and the four decisions worth making before your renewal date arrives. One of them is worth roughly a thousand dollars a year and almost nobody checks it.

What actually changed

Announced December 4, 2025. Effective July 1, 2026. Per user, per month, on annual commitment:

Plan	Was	Now	Change
Business Basic	$6.00	$7.00	+16%
Business Standard	$12.50	$14.00	+12%
Business Premium	$22.00	$22.00	unchanged
Apps for business	$8.25	$10.00	+21%

Enterprise moved too — Office 365 E3 $23 to $26, Microsoft 365 E3 $36 to $39, E5 $57 to $60. The frontline plans took the hardest percentage hits: F1 rose 33% and F3 25%. Entra ID P1 standalone went from $6 to $7.

Business Premium holding at $22 is the headline most coverage leads with, and it is real. But note what it means in practice: if you run Premium and any add-on at all, you still pay more, because nearly everything bolted onto it went up.

The two different “monthly” premiums

This is the most commonly botched part of Microsoft licensing, so it is worth separating clearly.

Web-direct month-to-month costs exactly 20% more. $7.00 becomes $8.40, $14.00 becomes $16.80, $22.00 becomes $26.40. That is a genuine no-commitment plan — cancel any time. The multiplier holds across every business SKU.

Buying through a partner on an annual term billed monthly costs 5% more. Different product entirely. You still owe the full twelve months; you are just spreading the payment.

Both statements are true, of different things. On a 25-seat Business Standard tenant, that 20% web-direct premium is $840 a year for flexibility most small businesses never use. If your headcount is stable, this is the easiest saving on the list.

Your renewal date is the only date that matters

Microsoft’s own language: existing customers remain on current pricing until renewal. July 1 was not the day your bill changed — your renewal date is.

That also means the lock-in trick worked. Anyone who committed to a twelve- or thirty-six-month term in June 2026 holds $6.00 and $12.50 until that term expires. The window for this increase has closed, but the mechanism is worth remembering: term pricing is fixed for the term, and Microsoft gives at least 30 days’ notice in the Message Center before a change.

One trap that arrived quietly: if you buy through a partner, the 30-day auto-renewal grace period was eliminated on May 4, 2026. At end of term you now renew, cancel — service stops immediately, data retained 90 days — or drift into an Extended Service Term billed day by day at the monthly rate plus roughly a 3% uplift. Calendar your end-of-term date now.

The Teams situation, which most articles still get wrong

Microsoft unbundled Teams from Microsoft 365 in April 2024. A lot of advice still reflects that world.

Teams was re-bundled on November 1, 2025 under Microsoft’s settlement with the European Commission. Teams-inclusive suites are back on sale to new customers worldwide, with no-Teams versions sitting alongside at mandated minimum discounts — and that arrangement is locked in for seven years.

Current no-Teams pricing: Basic $5.40, Standard $10.79, Premium $18.79.

Now do the arithmetic people skip. Teams Essentials standalone is $4.00 per user per month:

Plan	Bundled	No-Teams + Essentials	Result
Basic	$7.00	$5.40 + $4.00 = $9.40	Bundle wins by $2.40
Standard	$14.00	$10.79 + $4.00 = $14.79	Bundle wins by $0.79
Premium	$22.00	$18.79 + $4.00 = $22.79	Bundle wins by $0.79

Splitting is more expensive at every Business tier. The no-Teams SKU only pays off if you genuinely run Slack, Zoom, or Google Meet and buy no Teams license at all. In that case Standard saves $3.21 per user per month — $38.52 a year, or $963 annually across 25 seats. That is real money, but only if you actually abandon Teams. Half-measures lose.

What Microsoft added to justify it

Microsoft pointed to more than 1,100 features shipped across Microsoft 365, Security, Copilot, and SharePoint in the prior year. The substantive additions:

• Microsoft 365 Copilot Chat is now in the base plans, with inbox and calendar awareness plus access to Word, Excel, and PowerPoint agents. It was previously a separate purchase. This is the actual core of the increase — AI is no longer something you can decline.
• Basic and Standard gained URL time-of-click protection against known malicious links, plus 50GB of additional mailbox storage.
• E3 picked up Defender for Office 365 P1, Intune Remote Help, Intune Advanced Analytics, and Intune Plan 2.
• Nothing was removed from any plan.

There is a non-obvious consequence buried in that E3 line. The July update widened the gap between Business Premium and E3 specifically on device management. E3 customers now get Intune Plan 2 features in the box. Business Premium customers did not, and still pay $3.50 per user per month for Remote Help if they want it. If you were weighing Premium against E3 on a features-per-dollar basis, that comparison shifted.

Microsoft and Google are now priced identically

Google raised Workspace prices in January 2025 when it bundled Gemini in. Current Google pricing, annual: Business Starter $7.00, Business Standard $14.00, Business Plus $22.00.

Microsoft’s July 2026 increase moved its three business tiers to exact parity — $7, $14, and $22 on both sides, with the same 20% flexible-billing premium and the same 300-seat cap.

Price parity is not capability parity, and it would be a mistake to read it that way. Google Business Plus does not match Business Premium feature for feature — Premium’s Intune, Defender for Business, and Entra ID P1 have no direct Google equivalent at that price. Where Google wins outright is storage: Business Standard includes 2TB per user versus Microsoft’s 1TB.

And switching is not free. Mail and calendar migration, .pst and shared-mailbox handling, file-fidelity rework in macro-heavy Excel workbooks, retraining, and rebuilding identity and device management if you were relying on Premium. Our Microsoft 365 versus Google Workspace comparison and the reverse view both go deeper.

What a 25-person company actually pays now

Annual commitment, 25 seats, twelve months:

• Business Basic: $2,100 — up from $1,800
• Business Standard: $4,200 — up from $3,750
• Business Premium: $6,600 — unchanged
• Business Standard, billed monthly: $5,040 — the $840 flexibility tax

The Standard-to-Premium gap narrowed from $9.50 to $8.00 per user per month. At 25 seats that is $2,400 a year to add Intune, Defender for Business, and Entra ID P1 — which is meaningfully cheaper than bolting Intune Plan 1 ($8) and Entra P1 ($7) onto Standard, a combination that would run $29 per user. If you are on Standard and paying for any security or device management add-on, re-run this comparison. It moved in Premium’s favor.

Nonprofits: check your grant status

Nonprofit discounts are a fixed percentage off list, so the higher list price flows straight through. Business Basic remains free up to 300 seats.

The bigger change happened earlier and caught a lot of organizations off guard: free Business Premium and Office 365 E1 grants ended July 1, 2025, at each organization’s next renewal, replaced by roughly 75%-off paid SKUs — Business Premium at $5.50 and E1 at $2.50. Those discounted rates rise proportionally with the new list prices. If your nonprofit has not renewed since mid-2025, budget for it.

Academic plans were not named in the announcement, which is not the same as confirmed unchanged.

Five things to do before your renewal

1. Find your actual renewal date. Not July 1 — yours. It is in the admin center under Billing, and it determines when you start paying more.
2. Reconcile your seat count. This is the single largest reliable saving and almost nobody does it. Every unused license now costs 12 to 21% more than it did. Departed employees, duplicate accounts, and licenses assigned to shared mailboxes that do not need them are all pure waste.
3. Re-run Standard versus Premium. The gap narrowed and Premium’s included security is worth more than it was.
4. Move to annual billing unless you genuinely need month-to-month flexibility. That is 20% on a web-direct subscription.
5. Only take no-Teams if you truly do not use Teams. Splitting and re-buying loses money at every tier.

Steps 1 and 2 both depend on knowing what you are actually paying for and when each subscription renews — which is exactly the thing most small businesses cannot answer on demand. If you do not have that written down anywhere, the Software License & Renewal Tracker lays out the fields, and there is a free lite version to start with. Our admin center walkthrough covers where to find the numbers, and IT budget planning covers building them into a forecast.

What is queued next

Two things to know before signing a multi-year term. The Copilot promotional bundles — Basic plus Copilot at $21 and Copilot Business standalone at $18 — expire December 31, 2026, so budget for the step-up if you buy in. And the EU commitments that keep the with-Teams and without-Teams price gap in place bind Microsoft for seven years, to roughly 2032.

No 2027 increase has been announced. That said, the pattern is now well established, and the lock-a-longer-term move demonstrably worked in June 2026. If you want to hedge, a longer commitment at renewal is the mechanism.

Key takeaways

• Effective July 1, 2026: Basic $6→$7, Standard $12.50→$14, Apps for business $8.25→$10. Premium held at $22.
• Existing customers stay on old pricing until their renewal date.
• Web-direct monthly billing costs exactly 20% more; partner annual-billed-monthly costs 5%. Different things.
• Teams was re-bundled in November 2025 — splitting it out and buying Teams Essentials loses money at every Business tier.
• Copilot Chat is now in the base plans, which is what the increase is actually paying for.
• Microsoft and Google Workspace are now priced identically at $7/$14/$22. Parity in price, not in capability.
• The Standard-to-Premium gap narrowed to $8.00 per user — worth re-running if you buy security add-ons.
• Partner-billed customers lost the 30-day auto-renewal grace period in May 2026.

Frequently asked questions

My bill has not changed. Did I miss something? No — you are on your old term. Microsoft applies new pricing at renewal, not on the announcement date. Find your renewal date and plan for it; the increase arrives then.

Is it worth switching to Google Workspace over this? Almost certainly not for price alone, since both are now $7, $14, and $22. Switch if the platform genuinely fits you better — Google’s storage allowances are more generous and its collaboration model is different. Do not switch over a dollar that no longer exists.

Can I mix plans across my team? Yes, and you probably should. Frontline or shop-floor staff who only need email and web apps do not need Business Standard. Mixing Basic for some users and Standard or Premium for others is fully supported and is usually a bigger saving than any negotiation.