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Microsoft 365 Licensing Explained

Overview of the core Microsoft 365 licensing plans

Business Basic

The basic Microsoft 365 plan includes the following features:

  • Email
  • Web versions of apps like Word, Outlook and Powerpoint
  • Microsoft Teams
  • 1TB for OneDrive personal storage and access to shared files in SharePoint


The cost of the Basic plan is £4.50 per user per month + VAT

Business Standard

The mid range Microsoft 365 plan includes the following features:

  • All the Business Basic features
  • Desktop version of apps like Word, Outlook and PowerPoint


The cost of the Standard plan is £9.40 per user per month + VAT

Business Premium

The top range Microsoft 365 plan includes the following features:

  •  All the Business Standrard features
  • Management of business tech environment with robust security
  • Rapid onboarding of new devices, new starters or existing employees who need a new device/reset of old device (automatic installation of all core apps, Mail and SharePoint)


The cost of the Premium plan is £16.60 per user per month + VAT

The graphic below shows the difference between Standard and Premium plans.

Microsoft 365 Plans

Apps for Business

This is useful for those who simply need desktop versions of MS Office but use different providers for email and storage.

  • Desktop versions of Office apps only
  • NO email account


The cost of the Apps for Business plan is £7.90 per user per month + VAT

Microsoft 365 New Pricing Model from March 2022

Until March 2022, Microsoft 365 licenses have, by default, been sold on a monthly term. This means that any license can be cancelled during the month and will not be renewed.

This has changed moving forward – please read this brief explainer for more information.

Microsoft New Commerce Experience (NCE) and what this means for licensing moving forward.

Microsoft has now introduced a new model which will charge a 20% premium to keep on this monthly licensing plan.

The alternative is to sign up for a year (12 months) to avoid this price increase.

This is similar to many other internet-based platforms. For example, Hootsuite or Adobe Creative Cloud Suite, advertise their plans based on annual billing.

So what does this mean for you?

  • Licenses are not bound to a specific user account.  You can change the account name/login as often as needed.
  • You can still have monthly licenses alongside your annual licenses.
  • Monthly licensing gives you flexibility and removes the need to pay for 12 months when you don’t need them.
    • Short-term employees or projects that may need an account could be better placed on a monthly plan.
    • For example, a monthly Microsoft 365 Basic plan costs £4.50/month + VAT +20% (annually this would cost you 12 months x £4.50+20% = £64.80 + VAT).
      • The same plan annually would cost you £54.00 + VAT.
      • If you had a temporary worker for 6 months, on a monthly Basic plan this would cost you £32.40 + VAT, which is less than an annual charge of £54.00 + VAT.