Microsoft 365 Is Getting More Expensive And Small Business Owners Are Stuck Paying
Small business owners opening renewal notices from Microsoft in 2026 will encounter a familiar frustration: another round of price increases for Microsoft 365 subscriptions. The software giant announced hikes affecting nearly every tier of its business plans, leaving companies dependent on Word, Excel, Outlook, and Teams with limited room to maneuver.
Price Jumps Hit Multiple Tiers Starting Mid-2026
Microsoft 365 Business Basic will climb 16.7% from $6 to $7 per user monthly beginning July 1, 2026, while Business Standard increases 12% from $12.50 to $14 per user each month. Business Premium remains unchanged at $22 monthly, though enterprise-level subscribers face their own adjustments.
- Business Basic: $6 → $7 per user/month (16.7% increase)
- Business Standard: $12.50 → $14 per user/month (12% increase)
- Business Premium: remains $22 per user/month
- Microsoft 365 E3: $36 → $39 per user/month (8.3% increase)
- Microsoft 365 E5: $57 → $60 per user/month (5.3% increase)
These changes arrive barely eight months after Microsoft implemented a separate round of increases in November 2025.
For context, Microsoft’s approximately 446 million paid seats could generate $10.7 billion in additional annual revenue from these adjustments, based on an average increase of $2 per seat across all tiers.
Budget Pressures Compound for Smaller Operations
A 10-person team currently paying for Business Standard will see monthly costs rise from $125 to $140, translating to $180 annually per employee.
Unlike Fortune 500 companies with dedicated technology procurement teams and negotiating leverage, small business owners typically handle vendor relationships while managing sales, operations, and customer service simultaneously. 90% of Fortune 500 companies use Microsoft 365, giving the platform significant market dominance that smaller buyers cannot match in negotiations.
The increases multiply across headcount at a time when many small businesses operate on thin margins. Each additional hire now carries higher technology costs built into the baseline budget, compressing resources available for marketing, inventory, or equipment upgrades.
AI Development Drives the Cost Structure
Microsoft attributes the pricing adjustments to ongoing investments in artificial intelligence features integrated throughout the platform. Copilot Chat upgrades now appear in Word, Excel, PowerPoint, and Outlook across multiple tiers.
- Business Premium subscribers gain access to Defender for Office protections within Teams and email.
- E5 plans include expanded Security Copilot capabilities.
These AI and security enhancements require substantial infrastructure spending. Microsoft Cloud margins have compressed to 68% as the company builds out datacenters and computing resources to support machine learning models.
The company positions these features as value-adds justifying higher subscription fees, though adoption rates vary widely among existing customers.
Limited Flexibility in a Cloud-Dependent Environment
Small business owners face vendor lock-in challenges that restrict their ability to respond to pricing changes. Years of document storage in OneDrive, email histories in Outlook, and collaborative workflows in Teams create switching costs that extend beyond simple subscription fees.
Australian users recently experienced forced migrations to higher-tier Copilot plans with unclear opt-out procedures, illustrating how platform dependency limits negotiating power.
Maria Chen, who operates a 12-person marketing agency in Portland, discovered the coming increases while reviewing her 2026 budget. Her team relies heavily on SharePoint for client project management and Teams for remote collaboration.
Migrating to Google Workspace would require retraining staff and transferring five years of archived materials, costs she cannot easily absorb during a competitive quarter.
The pattern of successive price increases signals ongoing adjustments as Microsoft balances AI development costs against revenue targets, leaving small businesses to absorb expenses without equivalent increases in their own pricing power.
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