Microsoft 365 just got a price hike over continuous innovation, but Copilot is the AI tax on businesses

As if the price increases across nearly everything weren’t enough, Microsoft 365 subscribers are now staring down a price hike that was first announced back in December 2025. Microsoft is calling it a “packaging and pricing update,” which is corporate speak for higher renewal bills across Business, Enterprise, Frontline, and Government suites, and the change officially kicked in on July 1, 2026.

The $2.9 trillion company’s reasoning is that this is not a plain cost hike but a culmination of everything they have shipped over the past year across AI, security, and IT management. Whether their AI spending justifies a 43% jump on some SKUs is a different conversation, and we will get to the numbers in a bit.

If you manage a Microsoft 365 Business account, or you are the person in your company who gets blamed when the software bill goes up, you have probably already received an email on your Microsoft account ahead of the July 1 deadline.

Fortunately, as of now, there is no change in pricing for Microsoft 365 Personal and Education.

How much more will you pay for Microsoft 365 after July 1?

Microsoft’s new pricing tables, first spotted by Windows Latest, show increases that are uneven across the lineup, and some are steep. Microsoft 365 Business Basic goes from $6 to $7 per user per month, a 16% increase. Business Standard climbs from $12.50 to $14, up 12%. Business Premium is one of the few plans staying flat at $22.

On the Enterprise side, Office 365 E3 rises from $23 to $26 (13%), Office 365 E5 goes from $38 to $41 (8%), Microsoft 365 E3 moves from $36 to $39 (8%), and Microsoft 365 E5 increases from $57 to $60 (5%). Office 365 E1 is not moving from $10. Microsoft 365 E7, the newer Frontier suite, is not part of this update at all.

Unfortunately, frontline workers get the hardest hit, with Microsoft 365 F1 jumping from $2.25 to $3, a 33% increase, and F3 going from $8 to $10, up 25%. It gets worse if you remove Teams from these plans, as the no-Teams version of F1 rises 43%, and Business Basic without Teams climbs 23%.

Don’t expect standalone add-ons to not get similar treatment as Windows Enterprise per-device licensing goes up 31%, from $5.85 to $7.63, and that is on top of RAM prices already climbing for companies budgeting new PCs this year. Microsoft 365 Apps per device rises 17%, from $36 to $42. Entra Plan 1 and EMS E3 both increase by double digits too.

Check the comparison below, and you’ll notice “with Copilot” in the new higher pricing scheme:

The software giant is just as unkind to nonprofits as it is with regular corporations. However, the former already has a fixed 60-75% discount off commercial rates, so their bills move in lockstep with everyone else’s. Government customers on GCC, GCC High, and DoD clouds see the same percentage bumps as their commercial equivalents, though US AGC is untouched, and any government increase above 10% gets phased in over several years to comply with federal rules. Consumer and education pricing are not changing at all.

What Microsoft says you get for the extra money

Microsoft is bundling in new capabilities to soften the blow. Office 365 E3 and Microsoft 365 E3 are getting Microsoft Defender for Office 365 Plan 1, which was previously an add-on people paid separately for. Office 365 E1, Business Basic, and Business Standard are picking up URL time-of-click protection, so links get scanned the exact moment when someone clicks them instead of only when the email is first received.

Microsoft 365 E3 and E5 tenants are also getting Intune Remote Help, Intune Advanced Analytics, and Intune Plan 2 folded into the suite. E5 customers get Intune Endpoint Privilege Management, Microsoft Cloud PKI, and Enterprise Application Management also. The biggest addition for E5 is Microsoft Security Copilot, which Microsoft had been selling separately and is now including at 400 Security Compute Units per month for every 1,000 licenses, capped at 10,000 SCUs.

Business Basic and Standard users get an extra 50GB of mailbox storage, and every affected suite is getting the Copilot Chat enhancements Microsoft rolled out earlier this year, including inbox and calendar awareness and access to Word, Excel, and PowerPoint agents. At this point, I am certain that the price increase is all for AI improvements!

Microsoft says the packaging changes began in June 2026 and should be complete by August 1, with a 30-day notice slated to come in the Message Center. If you already renewed before July 1, you keep your old price until your next renewal, and you still get every one of these features regardless of what you are paying.

Full pricing tables and the official FAQ are available on Microsoft’s licensing page.

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