Updated May 2026

Key takeaways_

• Microsoft 365 is a subscription-based productivity suite combining Office apps, cloud storage, collaboration tools and security features.
• Licensing options vary by features, security level, and user limits: ranging from Business Basic and Standard to Enterprise plans like E3 and E5.
• Choosing the right license depends on your organisation’s size, compliance needs and budget; balancing productivity tools with advanced security and analytics.

Microsoft 365 is comprised of many solutions that aid business collaboration and productivity. This includes core Office applications, cloud storage and collaborative tools.

By leveraging M365 across your organisation, you can empower everyone to work smarter and meet the challenges of the remote working world.

However, M365 is subscription-based, meaning you need the correct licence to use it. And there’s plenty of choice when it comes to licensing.

We’ve put together this guide to Microsoft 365 licensing to help you find the best option for your business.

What is Microsoft 365?

Microsoft 365 is a productivity suite that combines familiar Office apps (like Word, Excel, PowerPoint and Outlook) with cloud-based services and enhanced security features. It was formerly known as Office 365.

It’s designed to help individuals, businesses and enterprises achieve more. With cloud storage, it’s also built for the remote working environment, enabling your teams to work together even from separate locations.

M365 also benefits from twice-yearly updates, so you constantly gain new features and improvements.

The key benefits of M365 include:

• Work from anywhere: Access your files and applications from any device with an internet connection, thanks to cloud-based services and collaborative tools.
• Improved collaboration: Easily share and work on documents with others in real-time, preventing data being lost or stuck in multiple versions.
• Enhanced security: Protect your sensitive data with built-in security features, safeguarding your business against cyber attacks.
• Always up-to-date: Automatic updates allow you to get long-term value without having to move to new solutions.

What’s included in Microsoft 365?

Microsoft 365 comprises many tools and applications. These include:

Office applications_

• Word, for document creation and editing
• Excel, for spreadsheets and data analysis
• PowerPoint, for creating and sharing presentations
• Outlook, for email, calendar and contacts management
• OneNote, for digital note-taking

Cloud-based services_

• OneDrive, providing cloud storage for file backup and sharing
• SharePoint, for document management and collaboration
• Exchange, for email, calendar, and contacts management
• Microsoft Teams (included in most plans) for chat, meetings and integrated collaboration

Security, identity and device management_

Automation, apps and data tools_

AI capabilites_

• Microsoft Copilot (available as an add-on or bundled in higher-tier licences like E7) to assist with writing, analysis and everyday tasks
• AI-driven features embedded across apps, such as suggestions, summaries and workflow automation

The exact tools you get will depend on your plan type, as some contain more features than others.

How is Microsoft 365 licensed?

Microsoft 365 for businesses operates on a subscription model. It uses user-based licensing, with licences assigned to individual employees. You’ll pay for a license for every user, with the option to license on a monthly rolling contract or committing for 12 months to achieve the best price.

When it comes to licences, there are a few different plans to choose from, dependent on your needs and budget. M365 has options for both businesses and enterprises. The business options suit organisations with up to 300 users, while enterprise licences are ideal for bigger companies.

Let’s dive into the licensing options for each.

Microsoft 365 Business licenses_

Businesses with up to 300 users can choose from the below options:

• Microsoft 365 Business Basic: This plan provides essential cloud-based productivity tools like email, calendar and online versions of Office apps
• Microsoft 365 Business Standard: This plan includes desktop versions of Office apps, along with collaboration tools like SharePoint and Teams
• Microsoft 365 Business Premium: This plan offers all the features of Business Standard, alongside advanced security and management tools
• Microsoft 365 Apps for business: This plan focuses solely on desktop versions of Office apps without any cloud-based services

To compare exactly what you get under each plan, we’ve put together this handy table:

Microsoft 365 Enterprise licenses_

For enterprises with more than 300 users or advanced needs, Microsoft 365 also has enterprise options. These are:

• Microsoft 365 E3: This plan offers desktop versions of Office applications, advanced threat protection and additional features like Teams and Yammer.
• Microsoft 365 E5: The most comprehensive plan, offering all features of E3 plus advanced security, compliance and analytics capabilities, including Windows Virtual Desktop and Azure Information Protection.
• Microsoft 365 F3: Designed for frontline workers, this plan offers access to core productivity apps and services, but with limited features compared to E3 and E5. Any apps included will be exclusively for web and mobile.

Once again, we’ve put together a comparison table to show you the key differences:

Power Apps and Power Automate are also included within these licences, however they offer limited functionality compared to a full licence.

Choosing the right licence type will depend on the needs of your business and your budget, so spend time researching the options. A Microsoft partner will also be able to discuss different plans with you to uncover the best licence type for your business.

What about Microsoft E7?

In April 2026, Microsoft introduced E7 to the options of Microsoft 365 licenses. It represents the most comprehensive bundle in the Microsoft 365 stack. Positioned above E5, it brings together productivity, security, identity and AI into a single subscription designed for organisations looking to run AI at scale across the business.

At its core, E7 bundles:

• Microsoft 365 E5 (the full productivity, security, and compliance suite)
• Microsoft 365 Copilot (AI across apps like Word, Excel, Outlook, and Teams)
• Microsoft Entra Suite (advanced identity and Zero Trust access)
• Microsoft Agent 365 (a governance layer for managing and securing AI agents)

In practical terms, E7 simplifies what was previously a complex mix of licences and add-ons, particularly for organisations already buying E5, Copilot and identity/security upgrades separately.

It’s primarily aimed at organisations that are already mature in their security and data governance and are actively looking to operationalise AI at scale.

How much does a Microsoft 365 license cost?

A Microsoft 365 licence is priced as follows, for each type:

• Microsoft 365 Business Basic: £4.60 per user, per month with Teams, or £3.40 without Teams
• Microsoft 365 Business Standard: £9.60 per user, per month with Teams, or £7.10 without
• Microsoft 365 Business Premium: £16.90 per user, per month with Teams, or £14.40 without
• Microsoft 365 E3: £31 per user, per month with Teams, or £24.40 without
• Microsoft 365 E5: £49 per user, per month with Teams, or £42.40 without
• Microsoft 365 F3: £6.20 per user, per month with Teams, or £5.30 without
• Microsoft 365 E7: £81.60 per user, per month with Teams, or £75 without

Please note, these prices do not include VAT. Each plan will auto-renew at the end of the month or year (depending if you pay monthly or annually).

Some licence types are also available to try on a free trial, giving you a chance to experience it before you commit.

How to choose the right Microsoft 365 license_

Choosing the right Microsoft 365 licensing is about aligning the right capabilities to the right users. The most effective way to approach Microsoft 365 licensing is to treat it as a business decision, not just an IT one. That means understanding how different roles work, what they need day-to-day and where technology can add real value.

Start by segmenting your users rather than applying a single licence across the board. Not everyone needs the full functionality of an E5 or E7 licence. For example, frontline or operational staff may only require email and basic collaboration tools, while knowledge workers or leadership teams may benefit from advanced security, analytics and AI capabilities. Matching licences to roles is one of the quickest ways to reduce unnecessary spend.

Next, consider where your organisation sits in terms of size and complexity. Microsoft’s licensing structure is broadly split between Business plans (designed for organisations with up to 300 users) and Enterprise plans (for larger or more complex environments). If you’re approaching that threshold, it’s worth planning ahead to save disruption later.

Security and compliance requirements should also play a major role in your decision. If you’re operating in a regulated industry or handling sensitive data, plans like Business Premium or E5 become more relevant due to their built-in protection, device management and identity controls. In contrast, more basic plans may leave gaps that need to be filled with additional tools.

Finally, review your licensing regularly. With pricing changes, new features, and evolving ways of working, what made sense a year ago may no longer be the best fit today. Regular reviews help you identify unused licences, optimise spend, and ensure you’re getting full value from the platform.

You can read more about how to optimise your licensing strategy here.

Common licensing mistakes_

Even with a clear understanding of the options, many organisations fall into the same licensing traps. These are what you want to avoid:

• Over-licensing: Many businesses default to higher-tier licences to future-proof themselves, especially around security and AI. But in practice, this often results in paying for features that aren’t implemented or adopted. It’s usually more effective to start with what’s needed and scale strategically.
• Underestimating security requirements: Some organisations choose lower-cost plans like Business Basic or Standard without fully understanding the security gaps. This can lead to bolt-on tools, fragmented protection, or increased risk—especially in regulated industries.
• Ignoring how licensing is actually used: Licences are often assigned and left unchanged, even as roles evolve or teams grow. Without regular review, organisations accumulate unused or underused licences, turning what should be a flexible model into a static cost.
• Buying add-ons without revisiting the base licence: As new capabilities like Copilot, security or analytics are introduced, many organisations layer them on top of existing licences. In some cases, it would be more cost-effective to move users to a different plan where those capabilities are already bundled.
• Not planning for pricing and packaging changes: Microsoft licensing evolves frequently, with pricing updates and new features introduced on a regular basis. Failing to review licensing at renewal can result in unexpected cost increases or missed opportunities to optimise.

Other FAQs_

Is Microsoft 365 Copilot included in all licences?

No, Copilot is not included in most standard licences. It is typically purchased as an add-on for Business and Enterprise plans, although it is bundled into higher-tier licences like Microsoft 365 E7.

Do I need Microsoft 365 E5 or E7?

Not necessarily. These higher-tier licences are best suited to organisations with advanced security, compliance or AI requirements. Many businesses can meet their needs with Business Premium or E3, especially when licences are aligned correctly to user roles.

Can I mix different Microsoft 365 licences?

Yes. Most organisations use a mix of licences across different user groups. This allows you to match capabilities to roles. For example, assigning Business Premium to office staff and lighter licences to frontline workers.

How often should I review my Microsoft 365 licensing?

At a minimum, you should review licensing at renewal. However, regular reviews (e.g. annually or when roles change) help ensure you’re not paying for unused licences and that you’re taking advantage of new features as they become available.

Why choose Infinity Group as your Microsoft 365 Partner_

If you’re ready to migrate your legacy systems to Microsoft 365, working with a Microsoft partner can ensure a smoother transition. This includes helping you to determine the best plan for your business needs and configure it correctly across your teams.

Infinity Group are one of the largest independently owned Microsoft partners in the UK. Our expert consultants are accredited in Microsoft 365, enabling them to help you plan, deliver and adopt it across your business.

By understanding your unique goals and requirements, we’ll ensure you get the most out of your Microsoft 365.

Our dedicated service desk is fully Microsoft certified, meaning we can hands-on support whenever you need it.

Find out more about Microsoft 365 and our services.