Microsoft Copilot Licensing: Six Products, One Name, Zero Clarity
First Contact is a managed IT service provider (MSP) based in Whitefield, Manchester, founded in 2001, offering IT support, Microsoft 365 management and cybersecurity for growing businesses.
Try this at your next team meeting. Ask three colleagues whether the company has Copilot. One will say yes. One will say it's free. One will say they were told it costs extra.
All three are right. That's not a punchline, that's Microsoft's product naming department doing what it does best.
If you've only got a minute: "Copilot" now means at least five different things, some free and some paid. The paid one sits on top of a Microsoft 365 plan and can't be bought alone. The newest AI tools are billed by usage, like a taxi meter, rather than a flat monthly fee. And from 2 November, new Copilot Business licences bought through a Microsoft partner arrive with that meter switched on by default. None of this is a disaster. But nobody should discover it on an invoice.
The problem: Everything Is Called Copilot
Here's the cast, roughly in order of how much they'll cost you.
Copilot (the app and website). Free, for anyone. A chatbot. Pleasant, but it's never seen your files.
Copilot Chat. Free with a work Microsoft 365 account, and where you use it matters. Inside Outlook it can read your inbox and calendar. In the standalone Copilot Chat app it only knows the web and whatever you give it. Neither can work across your company's documents the way the paid version can.
Microsoft 365 Copilot. The paid add-on. This is the one that lives inside Word, Excel, Outlook and Teams and can actually work with your company's information (only what each person already has access to). It needs a qualifying Microsoft 365 plan underneath it first.
Copilot Business. The same idea, packaged for businesses with up to 300 users.
The "with Copilot" plans. Since July, Microsoft also sells Business Standard and Business Premium with Copilot already baked in. Same capability, different route, different price.
Copilot Credits. Not a licence at all. A currency, used for the newer tools. More on that below.
And then there's "Premium". Business Premium is a security-heavy Microsoft 365 plan for companies. Microsoft also sells a home subscription with Premium in the name. Same word, different product, different customer. Nobody in Redmond flinched.
The catch: Two Ways to Pay (and You'll Probably Have Both)
The everyday Copilot is a season ticket. Flat fee per person per month, use it as much as you like.
The newer, do-the-work-for-you tools are a taxi. Copilot Cowork, which goes off and completes multi-step jobs on its own, is metered in Copilot Credits. So are the Work IQ APIs, which let other software tap into your Microsoft data. A credit costs about one cent on pay-as-you-go. You can also prepay for a year's worth of credits at a discount, but anything unused by the end of the year is gone.
Cowork needs the paid Copilot licence first, then charges credits on top. You pay to get in the taxi, then you pay for the journey.
A single chat question is cheap. A single Cowork task can be dozens of steps behind the scenes, so it isn't chat-prompt maths. Partners relaying Microsoft's own estimator have a busy technical user racking up several hundred dollars a month in credits, on top of the licence. Your mileage will vary. That's rather the point.
Coming soon: What Changes on 2 November
From 2 November, new Microsoft 365 Copilot Business licences bought through a Microsoft partner come with usage-based billing preconfigured. Microsoft's reasoning is less setup for customers. The translation is that metering stops being something you opt into and becomes the starting position.
This only applies to new purchases, and cost controls still exist. But "on by default" is how most surprise bills begin.
Microsoft has also swapped its big twice-yearly roadmap announcements for a rolling stream of updates. So there won't even be one big autumn heads-up to warn you. Add the July price changes (which hit at renewal) and the end of the old grace period after a subscription lapses, and renewals now need an actual decision rather than a shrug.
What to do: Five Minutes That Save a Nasty Invoice
Decide who genuinely needs paid Copilot. Usually not everyone. Start with the people who live in email, documents and meetings.
Check your current plan. For a full rollout, the "with Copilot" bundle is often cheaper than a standalone add-on. For a handful of users, the add-on usually wins.
Ask whether usage-based billing is on. If it is, ask what the spending cap is. If nobody knows, that's your answer.
Put your renewal date in the diary. Prices apply at renewal, and it's the natural moment to tidy up.
Ask your IT provider to explain it in plain English. If they can't, that's useful information about your IT provider.
Key takeaway: It's Not Complicated, Just Badly Labelled
Underneath the naming chaos, it's simple. There's a free tier, a per-person paid tier, and a pay-for-what-you-use tier for the clever new stuff. The trouble is that all three are called Copilot, and Microsoft keeps shuffling the boxes.
You don't need to master the price list. You need someone who has, and who'll tell you what you actually need before you're locked in for a year.
FAQs
Is Microsoft Copilot free?
The standard Copilot app and Copilot Chat (with a work Microsoft 365 account) are free. Microsoft 365 Copilot, the version that works across your company's documents, files and meetings inside Word, Excel, PowerPoint and Teams, is a paid add-on.
Do I need a Microsoft 365 plan to buy Microsoft 365 Copilot?
Yes. It can't be bought on its own. It sits on top of an eligible plan such as Business Basic, Standard or Premium, or you can choose a plan that includes Copilot from the start.
What are Copilot Credits?
A usage-based currency for newer AI tools such as Copilot Cowork and the Work IQ APIs. You pay for what you use rather than a flat monthly fee. One credit costs about one cent on pay-as-you-go.
What changes on 2 November 2026?
New Microsoft 365 Copilot Business licences bought through a Microsoft partner will have pay-as-you-go billing preconfigured by default. It doesn't change existing subscriptions, but it's worth asking your provider what limits are in place.
Is Copilot worth it for a small business?
For the right people, often yes. The question is who, and on which licence. Rolling it out to everyone by default is the fastest way to overspend.