If your business runs on Microsoft 365, your licensing bill is about to rise. From 1 July 2026, Microsoft is increasing the price of most of its commercial plans, and the change has been generating a fair amount of noise online, with plenty of warnings about an "AI tax" being passed on to customers.
The increase is real. But it is worth cutting through the panic, because the picture is more nuanced than some of the louder posts suggest, and there are a couple of things UK businesses can do now to soften the impact, or avoid it entirely for a while.
Here is a straightforward look at what is changing, what it means in pounds, and what to actually do about it.
What is changing?
Microsoft confirmed back in December 2025 that it is raising list prices across its Microsoft 365 commercial range from 1 July 2026. The increases apply to new purchases and to existing customers at their next renewal after that date. The rises are not uniform, ranging from modest single-digit percentages on some plans to low double digits on others.
For most UK SMEs, the plans that matter are Business Basic and Business Standard, and both are going up.
Crucially, these are global list price changes, separate from Microsoft's twice-yearly currency review. Microsoft had not published final harmonised GBP prices at the time of writing, so the pound figures below should be treated as indicative for budgeting. The percentage increases, however, are confirmed and will carry across to UK pricing.
What it means in pounds
Here is the practical picture for the most common UK business plans, on annual billing, excluding VAT.
Microsoft 365 Business Basic is rising by roughly 16 to 17%. Business Standard is rising by around 12%. Business Premium is not listed as receiving a suite price increase, and Office 365 E1 is also expected to hold flat. At the enterprise end, Office 365 E3 rises by about 13% and Microsoft 365 E3 by roughly 8%, with the E5 tiers seeing smaller single-digit rises. Business Basic and Business Standard are the plans most UK SMEs run day to day, and both are increasing, so those are the ones to focus on.
To put a real number on it, a 20-user business on Business Standard would move from around £2,304 per year to roughly £2,580 per year, an increase of about £276 across the team before VAT. Not catastrophic on its own, but it adds up across larger headcounts and multiple licence tiers, and it stacks on top of every other cost rise landing in 2026.
The part most posts miss
It is easy to read the headlines and conclude Microsoft is simply hiking prices to cover its AI spending. There is some truth to that, but two points are worth keeping in mind before you treat this as outright profiteering.
First, the underlying pricing on these suites had not actually moved for several years. So while the percentages look steep in isolation, this is the first significant adjustment in a long time rather than a sudden annual pattern.
Second, Microsoft is genuinely adding capability to the base plans rather than just lifting the price. The increases come bundled with extras that previously cost more or sat in higher tiers: enhanced email security and anti-phishing protection on the business plans, an increase in mailbox storage from 50GB to 100GB per user, and Copilot Chat features woven into the everyday apps.
The honest question, then, is not whether the increase is justified in the abstract. It is whether your business will actually use what is being added. If your team will benefit from the new security and AI features, the extra cost may be reasonable value. If you already pay a third party for security, or your team has no interest in Copilot, you may simply be paying more for tools you will not touch. That is the conversation worth having before you renew.
What you can do before 1 July
The deadline is not a cliff edge for everyone. There are sensible steps that can defer or reduce the impact.
The most direct option is to renew before your price changes. Existing customers stay on current pricing until their first renewal after 1 July, and depending on your agreement, renewing early can lock in today's rates for the next 12 or even 36 months. If your subscription happens to renew in the second half of 2026, this is the single highest-value action available to you, and the window to act is now rather than in late June.
Beyond timing, this is a good moment to audit what you are actually paying for. Most businesses accumulate licences over time: people leave, roles change, and seats end up over-specified or sitting unused. A proper review often finds savings that offset much of the increase on their own.
It is also worth re-examining your tier mix. Because Business Premium is not rising while Standard is, the gap between the two is narrowing. Premium includes stronger security and device management, so for some businesses the upgrade maths now makes more sense than it did a year ago. The cheapest plan is not always the best value once you account for the security features you would otherwise buy separately.
Finally, match the plan to the user. Not everyone needs the same licence, and aligning licences to actual usage is where the real efficiency usually hides.
Should you panic? No. Should you plan? Yes.
This is a price increase worth taking seriously, but it is not a reason to rush into rash decisions like a disruptive platform migration purely to dodge a percentage. For most UK businesses, the smart move is calm and practical: understand your renewal date, review what you are paying for, and make a deliberate decision about Copilot and security rather than letting the change happen to you by default.
Handled properly, the July increase can actually be a useful prompt to tidy up your licensing and end up paying less than you do today, even with higher per-seat prices.
How West Pier Technologies can help
At West Pier Technologies, we help UK businesses review their Microsoft 365 licensing ahead of the July 2026 changes, and work out the most cost-effective setup for how their teams actually operate.
That includes reviewing your current licences and renewal dates, identifying unused or over-specified seats, advising on the right tier mix, and planning any changes before your pricing moves. Where your communications and phone systems connect into Microsoft 365 and Teams, we can review that too, so the whole setup works together rather than in silos.
If you want a clear, jargon-free view of what the price changes mean for your business, and how to keep your costs under control, get in touch for a licensing review.
Frequently asked questions
When is the Microsoft 365 price increase happening? The new pricing takes effect on 1 July 2026 for new purchases. Existing customers move to the new prices at their first renewal after that date.
How much are Microsoft 365 prices going up in the UK? It varies by plan. Business Basic is rising by around 16 to 17% and Business Standard by about 12%, while Business Premium and Office 365 E1 are not listed as increasing. Enterprise plans such as E3 and E5 rise by single digits to low teens.
Why is Microsoft increasing the price? Microsoft says the increases reflect new capabilities being added to the plans, including enhanced security, more mailbox storage and Copilot Chat features. It is also the first major adjustment to these suites in several years.
Can I avoid the price increase? You cannot avoid it indefinitely, but you can defer it. Renewing before your price changes can lock in current rates for the length of your new term, and reviewing your licences can reduce your overall bill regardless.
Is Business Premium now better value than Business Standard? Potentially. Because Premium is not rising while Standard is, the price gap is narrowing, and Premium includes stronger security and device management. For some businesses the upgrade now makes more financial sense than before.
Does this affect Microsoft 365 Copilot pricing? This change bundles some Copilot Chat features into the base plans. The separate, full Copilot add-on remains a distinct licence on top of your core subscription.
