Microsoft 365 Prices Are Rising: How SMBs Can Protect Budgets

If you’re like most SMBs, chances are Microsoft licensing already takes up a significant portion of your annual IT budget. So when Microsoft announces another price rise (with just six months’ notice), it naturally creates concern, especially if your organisation has already finalised next year’s financial plans. 

But this increase isn’t happening in isolation. Alongside the uplift, Microsoft is rolling out new functionality, capacity upgrades, and security improvements, some of which offer genuine cost-saving opportunities for SMBs — if they act early.

s Babble’s Modern Workplace Product Manager, I’ve been tracking the changes closely and working with UK businesses to understand what the impact will be — and more importantly, how to mitigate any surprises.

This article breaks down what’s changing, what’s new, and the steps SMBs should take well before 1 July 2026 to protect their budgets.

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What This Article Covers:

• Why This Microsoft Price Rise Hits SMBs Differently
• How Much Are Prices Increasing?
• Why Renewing Before 1 July 2026 Matters So Much
• Why Licence Visibility Is the Key to Controlling Costs
• How Babble Is Helping SMBs Prepare
• What SMBs Should Do Now

Why This Microsoft Price Rise Hits SMBs Differently

Microsoft has introduced several price rises in recent years, but this latest one comes with the kind of short notice that can make planning difficult (especially for SMBs that lock budgets well in advance).  For enterprises, new features can justify some of that increased cost. But the story is a little different for SMBs: there isn’t as much new functionality coming to SMB licences compared with enterprise.

With that said, there are meaningful updates, particularly around email storage and security, that could help offset some of the impact. The key is knowing where those gains are hiding – let’s have a look.

Email Storage Doubles — and That Could Lower Costs

By far, this is the most tangible improvement for SMBs. Business Basic, Business Standard and Business Premium mailboxes will all increase from 50GB to 100GB per user.

For many SMBs, this unlocks a direct saving. Right now, organisations that outgrow the 50GB limit often upgrade users to Exchange Online Plan 2, which includes a 100GB mailbox and costs about £5.98 per user/month.

With Microsoft now doubling mailbox capacity across core business licences, most SMBs no longer need to purchase Plan 2 at all (even after the Business Basic and Standard price rises). This is one of the rare moments where a Microsoft increase may actually help reduce total spend, because it still works out cheaper overall.

Stronger Security for SMB Plans

Security improvements are also being released for lower-tier plans, including:

• URL checking in Office and Outlook (web and mobile).
• Strengthened protections against malicious links, which is especially valuable given that email remains the number one attack vector.

For Business Premium users, additional improvements include:

• More security management features
• Analytics for Copilot Chat, improving visibility and governance.

While these may not be as extensive as what’s coming to E3 and E5, they’re meaningful additions for SMBs that have historically had to rely on third-party tools

How Much Are Prices Increasing?

The uplift varies between 3% and 30%, depending on the licence.

Examples include:

• Business Basic: +$1 (75c) per user/month
• Business Standard: +$1.50 (£1.12) per user/month
• Business Premium: No price increase

It’s clear Microsoft is nudging customers toward Business Premium. And understandably so, given that it remains the best value SKU for most SMBs because it combines productivity, management, and security into one package.

Learn more about the pricing update here.

Why Renewing Before 1 July 2026 Matters So Much

Now this is the important part. According to Gartner’s Microsoft 2026 Price Increase Analysis, customers who renew before 1 July 2026 can lock in their existing pricing for another 12 months, and still receive all the new features when they roll out. This gives SMBs budget stability, time to adjust for future increases, and the flexibility to right-size licences before committing to a new term.

What Happens If SMBs Do Nothing Before July 2026?

If businesses wait until their natural renewal date:

• Business Basic and Standard users will immediately see price increases.
• Business Premium users will be protected for now, but that won’t be guaranteed forever.
• Organisations risk paying for tools that new features now make redundant.
• IT teams may face operational impact as new security features require configuration, monitoring, and user training.

In other words, doing nothing is the most expensive option.

Why Licence Visibility Is the Key to Controlling Costs

Gartner reports that 40% of organisations lack visibility into how their M365 licences are actually being used.

This leads to:

• Over-licensing
• Mis-licensing
• Paying for features users don’t need
• Buying third-party tools that Microsoft has since absorbed into its SKUs

We see common issues such as:

• Field workers using Business Premium even though their role doesn’t require it
• Organisations accidentally exceeding the 300-user Business Premium limit
• Customers paying for Exchange Online Plan 2 mailbox upgrades that the July 2026 update will make unnecessary

On the second point, we recently had a customer who exceeded the 300 Business Premium cap. We mapped departmental needs, shifted some users to E3, and rebalanced licences so the organisation retained necessary functionality without overspending.

Common Misconceptions That Cause SMBs to Miss Savings

From working with hundreds of businesses, we see the same issues repeatedly:

1. Auto-renewing without reviewing licences

This is the biggest trap. Licence needs evolve, features change, and Microsoft continuously adjusts SKUs (often without SMBs noticing).

2. Paying for third-party tools already covered by Business Premium

With more security and management tools being added, duplication is increasingly common.

3. Assuming Microsoft licences are “set and forget”

In reality, licensing now changes so frequently that annual reviews are essential. It’s why our mantra for 2026 is: “Renew with intent.”

How Babble Is Helping SMBs Prepare

We are supporting customers through three key areas:

1. Licensing Expertise

Our Microsoft specialists analyse usage, identify overspend, remove duplication, and ensure customers are only paying for what they need.

2. Microsoft 365 Value Service

We are firm believers in ongoing optimisation, not just once a year at renewal. So, we ensure that you’re constantly getting the most value from your M365 environment.

3. Renewal Toolkit

We give organisations everything they need to plan early, model their costs, and make informed decisions — without time pressure.

What makes our support different is simple: we don’t just resell licences, we help you understand them.

What SMBs Should Do Now

Microsoft’s latest price rise is unavoidable, but the financial impact doesn’t have to be.

Doing nothing leads to unnecessary cost increases, duplicated tools, and missed opportunities to lock in lower pricing.

As a Modern Workplace Product Manager at Babble, my job is to ensure you stay ahead of licensing changes, avoid overspend, and get full value from the tools you’re already paying for.

If you want to get ahead of the July 2026 changes, the best move you can make in the next 30 days is to book a free SmartCheck scan with us. We’ll help you:

• Identify hidden savings
• Decide whether early renewal is right for you
• Prepare for the new features arriving this year
• Avoid last-minute budget surprises

If you’re feeling blindsided by Microsoft’s constant updates, you’re not alone. Come and talk to us! We’ll keep you up to date so you stay productive, secure, and in control of your costs.