Microsoft has confirmed pricing and packaging changes to Microsoft 365 from July 1, 2026. For most organizations, this means their next renewal will cost more. The extent of that increase depends on current licensing position, assigned quantities, and how closely licensing aligns to actual business need.

In many estates, there are already gaps between what is being paid for and what is actually needed. The price increase simply makes those inefficiencies more expensive. 

Microsoft 365 Price Increase 2026 – Key Points

• Price increases take effect from July 1, 2026  
• Applies at your next Microsoft 365 renewal  
• Core plans including E1, E3, E5, and Frontline suites are impacted  
• Packaging changes introduce more bundled capabilities  
• Costs can often be reduced by optimizing licensing quantities and assigned suites before renewal, limiting the impact of the increase 

What’s Changing

Microsoft is increasing pricing across most core Microsoft 365 plans, alongside packaging changes. More capability is being bundled into standard licensing, particularly across security, device management, and AI. 

Some increases are significant and may have a material impact on budgets. For example, Microsoft 365 F1 (without Teams) is increasing by 43%, from $1.75 to $2.50 per user. 

Full details are available in Microsoft 365 pricing updates 2026. 

What the Microsoft 365 Price Increase Means for Your Organization

Most organizations are not starting from a fully optimized position. It is common to see users on higher-tier suites than required, inactive accounts still consuming licenses, duplicated subscriptions, and quantities that no longer reflect headcount or business need. 

Over time, this creates unnecessary cost that becomes more visible as prices increase. 

What to Do Before the Microsoft 365 Price Increase Hits

These changes typically take effect at renewal, which means there is still time to act before higher pricing has a direct impact on budgets. For organizations with renewals approaching in 2026, the priority should be getting the estate into shape before entering the next agreement. 

That usually comes down to three areas: clean-up, alignment, and planning. 

• Clean-up. Remove inactive users, orphaned accounts, and unused subscriptions that continue to generate cost.
• Alignment. Not every user needs E3 or E5. Licensing should reflect role requirements and entitlement needs.
• Planning. Avoid paying for capabilities before there is a defined business use case, particularly in areas such as AI. 

Where contract terms allow, organizations with July renewals may also be able to explore bringing renewal forward into June to reduce the impact of the increase.

The stronger your position before renewal, the less impact these pricing changes are likely to have.

Where Microsoft 365 Cost Savings Come From

When estates are reviewed properly, the impact can be significant. ITAA has helped customers reduce agreement costs by bringing licensing back in line with business requirements, removing unnecessary subscriptions, and correcting over-licensing.

Many organizations can identify 15–20% savings opportunities through targeted Microsoft 365 optimization ahead of renewal, depending on licensing maturity and estate complexity.

In some cases, results can be higher. On one engagement, ITAA helped deliver a 40% reduction in Microsoft 365 costs through estate clean-up, license realignment, and renewal preparation.

How ITAA Supports Microsoft 365 Optimization

ITAA supports organizations in reviewing their Microsoft 365 estate ahead of renewal, identifying avoidable cost and improving licensing alignment before new pricing takes effect.

Microsoft 365 Optimization can include reviewing:

• Inactive users
• Over-provisioned suites
• Duplicated subscriptions
• Licensing quantities
• Unnecessary spend

The result is a cleaner licensing position, lower renewal cost, and better alignment between spend and business need.

What This Means for Your Next Renewal

The July 1 price increase is fixed. The opportunity lies in reducing what you are paying before renewal. If your Microsoft 365 renewal is approaching in 2026 , now is the time to assess your position. 

ITAA can conduct a focused Microsoft 365 optimization review ahead of renewal to help reduce cost increases and improve your licensing position. 

If you would like to discuss your options, speak with our team for a 15-minute call. 

Lucy Baker, Senior Microsoft Consultant

Lucy Baker is a Senior Microsoft Licensing and IT Asset Management Consultant with extensive expertise in license risk remediation, optimisation, and audit defence. Known for delivering tailored, customer-focused solutions, Lucy specialises in Microsoft 365 optimisation, contract negotiation, and ITAM strategy, helping organisations navigate complex licensing environments with innovative thinking and precision.