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Microsoft's biggest Microsoft 365 pricing and packaging update in years takes effect on 1 July 2026. It touches every new and renewing commercial customer globally, with local market adjustments in the UK, and most plans are going up by somewhere between 5% and 33%. If that sounds alarming, the good news is there's a straightforward way to protect yourself, and it depends entirely on your renewal date.
In short: Existing Microsoft 365 customers keep their current pricing until their first renewal after 1 July 2026, so the single most valuable action is to check your renewal date and, if it falls just after that line, look at renewing early to lock in today's rate for another full term. Plans rise by roughly 5% to 33% depending on the SKU, but several also gain capability, larger mailboxes, more security in E3, that may let you drop an add-on and offset part of the increase.
What is actually changing in the 2026 update?
This isn't a small licence tweak. It's a wholesale repricing and repackaging of the Microsoft 365 commercial line-up, and it lands alongside a wave of new capability that started rolling into tenants from June 2026. Microsoft is giving 30 days' notice through the Message Center before anything new appears, so there's at least some warning built in, but the pricing side moves faster than most businesses expect.
The headline numbers, taken from Microsoft's own commercial pricing announcement: most Microsoft 365 plans rise somewhere in the 5% to 33% range, depending on the SKU and how it's packaged. Alongside the increase, you're also getting more for your money in places. Business Basic, Standard and Premium mailboxes are jumping from 50GB to 100GB, bringing them in line with what Enterprise customers have had for a while. E3 now includes Defender for Office 365 Plan 1, previously an add-on for many customers, and both E3 and E5 pick up expanded security, compliance and endpoint management capability as standard.
There's also a new tier above E5. Microsoft 365 E7, badged the "Frontier Suite," bundles everything in E5 with Microsoft 365 Copilot, Microsoft Entra Suite and a new product called Agent 365, aimed at governing AI agents running inside your tenant. It's priced at $99 per user per month, which puts it firmly in enterprise territory, but it's worth knowing it exists even if it's not right for you today.
Which date actually decides what you pay?
Here's the part we'd want every client to hear directly: if you're an existing customer, you keep your current pricing until your next renewal after 1 July 2026. Renew before that date, even by a few weeks, and you lock in today's rate for a full new term. Renew after, and you step straight into the new pricing on day one.
"The calendar date on the announcement isn't the date that affects you, your renewal date is. Get that timing right and this whole update becomes far less painful."
That timing detail is easy to miss in the noise around new features and packaging changes, but it's the single most actionable thing in this whole update. A business renewing an annual agreement in August, for instance, has a real window to bring that renewal forward and avoid an increase for another twelve months. A business that renewed in May is already sorted until next year. Either way, it's worth knowing exactly where you stand rather than assuming it'll sort itself out at the next invoice.
What does the increase actually cost you?
A percentage range is difficult to budget against, and 5% to 33% is a wide one. The useful exercise is to take whatever you currently spend on Microsoft 365 across a full year and apply both ends of the announced range to it, because until someone prices your specific licence mix against the new packaging, that band is the honest answer:
| Current annual Microsoft 365 spend | At the bottom of the range (5%) | At the top of the range (33%) |
|---|---|---|
| £5,000 | £5,250, up £250 | £6,650, up £1,650 |
| £10,000 | £10,500, up £500 | £13,300, up £3,300 |
| £25,000 | £26,250, up £1,250 | £33,250, up £8,250 |
| £50,000 | £52,500, up £2,500 | £66,500, up £16,500 |
Renewing early is worth about a year's increase
Two things follow from that. The first is that renewing before 1 July 2026 is worth roughly one year's increase on an annual agreement, because you defer the whole thing by a full term. On a £25,000 annual spend that is somewhere between £1,250 and £8,250 staying in the business for another twelve months, which comfortably justifies the administrative effort of bringing a renewal forward.
The increase is a gross figure, not a net one
The second is that the increase is a gross figure, not a net one. If the extra security now bundled into E3 lets you cancel an add-on you currently buy separately, subtract that annual cost from the delta above before you take a number to the board. For some tenants that closes a meaningful part of the gap, for others it closes none of it, and the only way to know which you are is to put your actual licence mix next to the new packaging and compare.
What should you do before your renewal?
None of this requires a dramatic response, but it does reward a bit of attention now rather than after the invoice lands. In practice, we'd suggest working through this in order:
- Find your actual renewal date and anniversary term, not just the invoice date, and check whether it falls before or after 1 July 2026
- If it's close to the line, talk to whoever manages your Microsoft agreement about renewing early to lock in current pricing
- Review whether the new inclusions, particularly the mailbox storage bump and the extra E3 security features, let you drop an add-on or a separate third-party tool you're paying for elsewhere
- Work out whether E7 and Frontier Suite are remotely relevant to you. For most SMB and mid-market businesses they won't be yet, but if you're already deep into Copilot and Entra, it's worth a proper look rather than a knee-jerk no
- Build the increase into your budgeting conversations now rather than discovering it at renewal time
None of these steps need to be complicated, but they do need someone to actually sit down with your current agreement, your renewal dates and your licence mix and work out what applies to you specifically. Every tenant's mix of plans, add-ons and renewal timing is different enough that generic advice only gets you so far.
Where this leaves you
The practical reality is that most businesses will pay more for Microsoft 365 over the next twelve months, but a good number will also get more for it, and a smaller number have a genuine opportunity to soften the impact simply by acting before 1 July rather than after. The businesses that come out of this best won't be the ones with the smallest increase on paper, they'll be the ones who checked their renewal date early enough to have options.
If you're not sure how this affects your renewal, or which of your current licences and add-ons the new inclusions make redundant, that's exactly what our Microsoft 365 licensing and support service is for, and a free assessment is the fastest way to see where you stand.
Frequently asked
When do the Microsoft 365 2026 pricing changes take effect?
Microsoft's repricing and repackaging of the commercial Microsoft 365 line-up takes effect on 1 July 2026. It applies to every new and renewing commercial customer globally, with local market adjustments in the UK. The date on the announcement is not necessarily the date you start paying more, though. Existing customers keep their current pricing until their first renewal after 1 July 2026, so a business whose anniversary falls in May 2026 stays on today's rates for another full term. The capability side runs on a separate clock: new features started rolling into tenants from June 2026, and Microsoft gives 30 days' notice through the Message Center before anything new appears. Check your renewal date first, because that single piece of information determines how the whole update lands on you.
Can I avoid the Microsoft 365 price increase by renewing early?
For a full term, yes, and it is the single most actionable thing in this update. Existing customers keep their current pricing until their first renewal after 1 July 2026. Renew before that line, even by a few weeks, and today's rate is locked in for a whole new term. Renew after it and you step into the new pricing on day one. A business with an annual agreement renewing in August 2026 therefore has a genuine window to bring that renewal forward and defer the increase by another twelve months, while a business that renewed in May 2026 is already covered until its next anniversary. It is worth raising with whoever manages your Microsoft agreement rather than assuming the timing sorts itself out at the next invoice.
How much are Microsoft 365 prices going up in 2026?
Most Microsoft 365 plans rise somewhere between 5% and 33%, depending on the SKU and how it is packaged, with local market adjustments applying in the UK. That range is wide enough that the percentage on its own is not much use for budgeting, so apply both ends of it to your own annual figure. On a £10,000 annual Microsoft 365 bill, 5% is £500 a year and 33% is £3,300. On £25,000 the same range works out at £1,250 to £8,250. Work your own number out before the renewal conversation rather than after it, and net off anything the new inclusions let you stop paying for separately, because for some tenants that offsets a real part of the increase.
What do you get in return for the Microsoft 365 price increase?
Several plans gain capability alongside the price rise. Business Basic, Standard and Premium mailboxes go from 50GB to 100GB, bringing them in line with what Enterprise customers have had for a while. E3 now includes Defender for Office 365 Plan 1, previously an add-on for many customers, and both E3 and E5 pick up expanded security, compliance and endpoint management capability as standard. That matters commercially as well as technically. If you currently pay separately for an add-on or a third-party tool the new inclusions cover, dropping it offsets part of the increase. Reviewing your licence mix and your add-ons against the new packaging is worth doing before you renew rather than after, while you still have the option to change what you buy.
What is Microsoft 365 E7 and the Frontier Suite?
E7 is a new tier sitting above E5, badged the Frontier Suite. It bundles everything in E5 with Microsoft 365 Copilot, Microsoft Entra Suite and a new product called Agent 365, which is aimed at governing AI agents running inside your tenant. It is priced at $99 per user per month, which puts it firmly in enterprise territory. For most SMB and mid-market businesses it will not be the right answer today, and there is no need to treat it as something you have to respond to. There is one situation where it deserves a proper look rather than a reflexive no: if you are already deep into Copilot and Entra and paying for those pieces separately, the bundle is worth pricing against what you currently hold.
