Microsoft is raising prices on Microsoft 365 business subscriptions in July 2026. The increase is real, the timing is fixed, and most of my QIT Solutions clients have not yet decided how to respond. This article covers what is changing, when, by how much, and the three things you can do before July to either avoid the increase entirely or minimize its impact.
If you want the official source, Microsoft's 2026 Microsoft 365 packaging and pricing notice has the full details. The rest of this article is the practical translation: what it means for SMBs and what to actually do about it.
What is changing in July 2026
Three things take effect at the start of July 2026:
- Annual price increase on most Business and Enterprise SKUs. The exact percentage varies by SKU. Most Business plans land in the 5-7% range. Some Enterprise plans see slightly higher increases tied to feature additions.
- New AI capabilities included in base plans. Microsoft is folding several previously-Copilot-only features into the base subscription tiers. This is the upside side of the same announcement: you get more for the higher price.
- Annual commit billed monthly is going away (or getting more expensive). The 5% premium on annual subscriptions billed monthly that landed in April 2026 stays. Microsoft is pushing customers toward annual-prepaid billing, period.
Net effect: most businesses will pay 5-7% more per user starting at their July renewal, with some additional features included that may or may not justify the increase depending on whether you use them.
Who this affects most
Three groups of customers see the biggest impact, and the right response is different for each:
Businesses on month-to-month billing
If you currently pay monthly without an annual commitment, the increase hits you immediately at July renewal. You also continue paying the existing 5% monthly-billing premium that landed in April. Combined, you are looking at roughly 10-12% higher annual cost than someone on annual prepaid.
The lowest-effort way to soften this: switch to annual prepaid before July. You lock in a year of pricing at the new rate but skip the monthly premium.
Businesses with renewal dates in late summer / fall 2026
If your renewal is August through December 2026, you have a small window. Microsoft typically allows renewing a few months early at current pricing. If you can renew in June 2026 instead of waiting for your scheduled renewal, you lock in a year of pre-increase pricing.
This is the highest-leverage move available, and most SMB customers do not know they can do it. Call your reseller or Microsoft account manager and ask about an early renewal at current pricing. The answer is often yes.
Businesses running multiple licensing types
If you have a mix of Business Basic, Business Standard, and Business Premium across different teams, the increase percentages are not uniform. The right move before July is a license audit: figure out who actually uses which tier, downshift anyone who is over-licensed, and then renew the survivors at current pricing if possible.
I have done this audit for several clients. The typical finding: 10-25% of seats are over-licensed for the role. That savings, combined with locking in pre-increase pricing on the rest, frequently nets out to a flat or lower bill despite the headline price increase.
Three things to do before July
1. Run a license audit
Pull the actual list of M365 licenses assigned at your tenant. For each user, ask:
- Are they actively logging in?
- Do they use the apps in the tier they are assigned to (e.g., desktop Office for a Business Standard user)?
- Is there a lower tier that would meet their actual usage?
Common findings: shared mailboxes that have a paid license attached and shouldn't, departed employees still occupying licenses, sales reps assigned Business Premium when they only use Outlook and Teams (Business Basic at $6 vs Premium at $22).
Microsoft's Microsoft 365 admin center has built-in usage reports that surface this data. The reseller portals (CSP partners, distributors) often have better tooling for this than the native admin center, so check what your reseller offers.
2. Consider an early renewal
If your annual term renews in July through December 2026, ask your reseller about renewing 30-90 days early at current pricing. Microsoft's policy for partners typically allows this, and the savings on a full annual term usually exceed the inconvenience of changing your renewal date.
The math: a 50-seat Business Standard renewal at the current $12.50 vs the new ~$13.25 (assuming 6% increase) is $450 in annual savings on the early renewal. For a 200-seat enterprise on E3, the savings can run $2,000-$5,000.
3. Evaluate Copilot now, not later
Microsoft's pricing increase announcement landed simultaneously with several feature additions to base plans, particularly around AI. Some customers will respond to the price increase by cutting Copilot licenses to offset it. Other customers should respond by leaning into Copilot, because the AI features moving into base plans reduce the marginal cost of Copilot's full version.
Whichever direction you go, the worst response is not deciding. The customers I see hurt most by these pricing transitions are the ones who pay the new price without changing anything, getting both the cost increase and no offsetting value capture.
For a deeper look at the full M365 plan landscape and which tier fits which team, see the Microsoft 365 business subscriptions comparison. For the Teams-specific licensing changes that landed in April 2026 (separate from this July increase), see the Teams plans comparison.
What I am not recommending
Two responses to the increase that I see other consultants suggest, and that I think are usually wrong for SMBs:
Switching to Google Workspace to avoid the increase. Google Workspace is a legitimate platform, but if you are deeply integrated with Microsoft 365 (Teams, SharePoint, Exchange, Intune), the migration cost dwarfs the price difference. The total cost of ownership over 3 years usually favors staying on M365 unless you have specific reasons to switch beyond pricing.
Buying through gray-market resellers to lock in old pricing. Some resellers pitch "lock in 2025 pricing for 3 years" deals that are too good to be true. Verify the licensing path is supported by Microsoft directly. I have seen clients lose access to admin features because they bought through a non-tier-1 partner whose discount came from licensing arrangements Microsoft later voided.
Stick with reputable CSP partners or buy direct. The 6% increase is annoying but stable; gray-market deals are not.
If you have not done anything yet
The deadline is July 1, 2026. As of writing, that gives you roughly 8 weeks. Here is the minimum viable plan for a 50-200 seat business:
- This week: Pull your license assignment report from the M365 admin center. Identify any inactive or over-licensed users.
- Next 2 weeks: Right-size the licenses you have. Drop inactive seats, downshift over-licensed users.
- By end of May: Talk to your reseller about an early renewal at current pricing. If your term ends in July-December 2026, lock in pre-increase pricing.
- Before July 1: Decide your Copilot strategy. Either commit to it (and capture the AI features moving into base plans as a reason to expand) or explicitly choose not to invest, with clear reasoning.
The whole process is 4-8 hours of admin work for an organization under 200 seats. The payoff is typically 5-15% lower total Microsoft 365 spend over the next year compared to doing nothing.
Frequently asked questions
Will Microsoft 365 price go up in July 2026?
Yes. Microsoft announced annual price increases on most Business and Enterprise SKUs effective July 2026. The exact percentage varies by SKU but most Business plans see 5-7% increases. The 5% premium on monthly-billed annual subscriptions that landed in April 2026 also stays in effect.
How to avoid the Microsoft 365 price increase?
Three options. First, renew your annual term early (in May or June) at current pricing if your term ends in July-December 2026. Second, run a license audit and right-size to reduce total seat count. Third, switch from monthly to annual prepaid billing to drop the 5% monthly premium. Most SMBs combining all three end up flat or lower than before the increase.
Why is Microsoft 365 increasing prices?
Microsoft cites added value: new AI features, expanded capabilities, infrastructure investments. The honest read is more nuanced. Microsoft has pricing power in the SMB and enterprise productivity space and is exercising it. The added features are real, but the increase would have happened regardless of feature additions because Microsoft 365 is the dominant platform and customers have limited alternatives.
How much does Microsoft 365 cost for a business after July 2026?
Indicative new pricing (subject to confirmation against your reseller):
- Business Basic: ~$6.40/user/month (up from $6.00)
- Business Standard: ~$13.25/user/month (up from $12.50)
- Business Premium: ~$23.50/user/month (up from $22.00)
- Microsoft 365 E3: ~$38.75/user/month (up from $36.75)
- Microsoft 365 E5: ~$60.00/user/month (up from $57.00)
These are approximations. Confirm against Microsoft's official pricing page and your reseller's quote before budgeting.
Should I switch to Google Workspace because of the price increase?
Almost never worth it for the price difference alone. If you are heavily invested in Teams, SharePoint, Exchange, or Intune, the migration cost over 3 years exceeds the cumulative price difference. Switch only if you have specific reasons beyond pricing. Like a strategic decision to standardize on Google for other reasons.
When does the Microsoft 365 price increase take effect?
July 1, 2026 for most SKUs. Existing annual terms renew at the new rate when their current term ends. Customers on annual prepaid through July or later are insulated until their next renewal. Monthly customers see the increase at the next monthly billing cycle starting July 1.
About the author
Jess Coburn runs QIT Solutions, a managed services firm that has handled Microsoft 365 licensing, deployment, and operations for hundreds of small and mid-sized businesses since 2002. He writes about practical IT operations, Microsoft licensing changes, and where AI actually pays off in small-business workflows. More posts on Microsoft 365 strategy live on the blog, and you can find him on LinkedIn.