Microsoft 365 E3 vs E5: Which One Your Business Actually Needs
For most organisations weighing up Microsoft 365 licensing, the real decision comes down to two plans: E3 and E5. One covers the core productivity and management tools most businesses run on. The other adds a substantial layer of security, compliance, and analytics on top, for a noticeably higher price per user.
The difficulty is that the gap between them isn’t always obvious from a feature list, and the higher tier isn’t automatically the better choice. Plenty of organisations pay for E5 and use a fraction of what it adds, while others sit on E3 and quietly fill the gaps with separate tools that would have been cheaper bundled in. Getting the decision right means understanding what you’d actually use, not just what looks more complete on paper.
That decision has also just become more expensive to get wrong. Microsoft raised its list prices across the board on 1 July 2026, and launched a new top tier above E5, which shifts the maths for some organisations and muddies it for others.
Knowing what each plan genuinely gives you, at today’s prices, is the difference between a licence that pays for itself and one that quietly drains budget.
Quick summary
The right choice between E3 and E5 depends far more on which security and compliance features you’ll actually use than on which plan looks more complete.
Paying for E5 and using only its productivity apps is one of the most common licensing inefficiencies in Microsoft 365.
What Microsoft 365 E3 includes
E3 is the plan most organisations think of as “full” Microsoft 365. It covers the desktop and web versions of the core Office apps, Exchange, Teams, SharePoint, and OneDrive, along with the essential management and security foundations: Microsoft Intune for device management, Entra ID for identity, and a baseline set of security and compliance tools.
For a great many businesses, E3 genuinely is enough. It handles productivity, collaboration, device management, and core identity security without pushing costs higher than they need to be. The July 2026 update strengthened it further by folding in Defender for Office 365 Plan 1, which adds advanced phishing and malware protection such as Safe Attachments and Safe Links, along with several Intune management tools that were previously separate add-ons. If you were paying for any of those separately, that change partly offsets the price rise. The question is never whether E3 is capable, it’s whether the specific gaps above it are ones your organisation actually needs to close.
What Microsoft 365 E5 adds
E5 includes everything in E3, then layers on a substantial set of advanced capabilities. The main additions fall into a few areas:
- Advanced security. The full Microsoft Defender suite, including Defender for Endpoint, Defender for Office 365, and Defender for Cloud Apps, providing considerably deeper threat protection than E3’s baseline.
- Compliance and information protection. The full Microsoft Purview capabilities, covering data loss prevention, information governance, eDiscovery, and advanced auditing.
- Analytics. Power BI Pro included per user, rather than purchased separately.
- Voice. Phone System and audio conferencing, enabling Teams Phone as a full business phone system.
The value of E5 depends entirely on how much of that list applies. For an organisation with genuine regulatory compliance obligations, a need for advanced threat protection, and a case for consolidating its phone system into Teams, E5 can work out cheaper than buying those things separately. For an organisation that would use none of them, it’s paying a premium for capability that sits idle.
The honest way to choose between them
The decision comes down to a straightforward question, applied honestly: would you actually use what E5 adds?
A few situations where E5 tends to justify itself:
- You have regulatory or contractual compliance obligations that E3’s baseline tools don’t meet
- You’d otherwise be buying advanced threat protection, Power BI Pro, or a phone system separately, and the bundled cost works out lower
- Your risk profile genuinely warrants the deeper Defender protection
And where E3 is usually the sensible call:
- Your compliance needs are met by E3’s baseline capabilities
- You don’t need Power BI Pro across the organisation, or only a handful of users do
- Your phone system is handled well enough elsewhere, or isn’t moving to Teams
A middle path worth knowing about: Microsoft offers individual E5 capabilities, such as the security or compliance components, as standalone add-ons to E3. Organisations on E3 are eligible to buy the Microsoft Defender Suite and Microsoft Purview Suite as add-ons rather than upgrading the whole licence. For organisations that need only one part of what E5 offers, adding that single component to E3 is often more cost-effective than upgrading everyone to the full E5 licence.
Where E7 fits in
In May 2026, Microsoft launched a new top tier above E5, called E7, or the “Frontier Suite.” At around £75 per user per month, it bundles E5 together with Microsoft 365 Copilot, Agent 365 (a governance layer for AI agents), and the Microsoft Entra Suite into a single licence, and now sits alongside E3 and E5 on Microsoft’s own enterprise plans page.
It’s worth being clear about what E7 is and isn’t. It isn’t a general “even better than E5” upgrade in the way E5 is a step up from E3. It’s a specific bet on AI adoption, aimed squarely at organisations that are moving Copilot and AI agents from pilot into full operational use, and that need to govern those agents under the same security framework as their people. The consistent industry read is that E7 only works out worthwhile when an organisation actually uses all four bundled components. For anyone using less than the full set, a tailored E5-plus-add-ons approach almost always works out better value.
For the vast majority of organisations still weighing E3 against E5, E7 isn’t part of the decision yet. It’s worth knowing it exists, and worth revisiting if a serious, organisation-wide AI deployment is genuinely on the horizon, but it doesn’t change the core E3-versus-E5 question most businesses are actually asking.
- You have regulatory or contractual compliance obligations that E3’s baseline tools don’t meet
- You’d otherwise be buying advanced threat protection, Power BI Pro, or a phone system separately, and the bundled cost works out lower
- Your risk profile genuinely warrants the deeper Defender protection
And where E3 is usually the sensible call:
- Your compliance needs are met by E3’s baseline capabilities
- You don’t need Power BI Pro across the organisation, or only a handful of users do
- Your phone system is handled well enough elsewhere, or isn’t moving to Teams
A middle path worth knowing about: Microsoft offers individual E5 capabilities, such as the security or compliance components, as standalone add-ons to E3. For organisations that need only one part of what E5 offers, adding that single component to E3 is often more cost-effective than upgrading everyone to the full E5 licence.
Common mistakes and pro tips
- Defaulting to E5 because it looks more complete, without checking whether the added features will be used
- Paying for E5 across the whole organisation when only a subset of users need its advanced capabilities
- Overlooking the standalone add-on route, which can deliver a single E5 capability on top of E3 for far less than a full upgrade
- Forgetting to revisit licensing after the July 2026 price changes, which shifted the maths for organisations already combining E5 with separate Copilot licences
A licensing review that maps what you’re paying for against what’s actually being used is one of the quickest ways to either save money or close a genuine capability gap, and often both at once.
Paying for E5 and not sure you’re using it?
Our free Microsoft 365 risk and cost health check looks at your tenant, your security posture and your licence spend, and tells you exactly where you’re overpaying or under-protected. No obligation, and if your licensing is already right-sized we will say so.
The bottom line on Microsoft 365 E3 vs E5
There’s no universally correct answer, only the right answer for your organisation’s actual needs. E3 is the sensible, capable default for businesses whose security and compliance requirements are straightforward. E5 earns its higher price where advanced security, compliance obligations, Power BI, or a Teams-based phone system are genuinely needed, and can even save money in those cases. The expensive mistake is paying for the higher tier and using a fraction of it.
Our Microsoft 365 Support service includes reviewing your licensing against what your organisation actually uses, so you’re neither overpaying for idle capability nor missing protection you genuinely need. If you’d like a clear read on where you currently stand, our free Microsoft 365 risk and cost health check is a straightforward place to start.
STRAIGHT ANSWERS
Frequently asked questions
The questions people actually ask us about Secure Score, answered without the sales pitch.
What is the main difference between Microsoft 365 E3 and E5?
E3 covers the core Microsoft 365 apps, collaboration tools, and baseline device and identity management. E5 adds the full Defender security suite, complete Purview compliance capabilities, Power BI Pro, and phone system features. The practical difference is a substantial layer of advanced security, compliance, and analytics on top of the E3 foundation.
How much do Microsoft 365 E3 and E5 cost?
Following Microsoft’s price increase on 1 July 2026, E3 rose by around 8% and E5 by around 5%, putting UK list prices at roughly £33 per user per month for E3 and £52 for E5. Microsoft has been clear that GBP pricing varies by country, currency, and agreement type, so these figures are best treated as a guide for budgeting rather than an exact quote. It’s worth confirming your specific pricing through your licensing partner or agreement.
Is Microsoft 365 E5 worth the extra cost?
It depends entirely on whether your organisation would use what E5 adds. Where advanced threat protection, regulatory compliance tooling, Power BI Pro, or a Teams-based phone system are genuinely needed, E5 can be worthwhile and sometimes cheaper than buying those separately. Where they aren’t, E3 is usually the more sensible choice.
Can I add individual E5 features to E3 instead of upgrading?
Yes. Microsoft offers certain E5 capabilities, such as the security or compliance components, as standalone add-ons to an E3 licence. For organisations that need only one part of what E5 offers, this is often more cost-effective than a full E5 upgrade.
Should my business consider Microsoft 365 E7?
For most organisations choosing between E3 and E5, no, not yet. E7 is aimed specifically at organisations operationalising AI across the business and needing to govern AI agents under a unified security framework. Unless a serious, organisation-wide AI deployment is genuinely planned, E7 is unlikely to be the right fit today.
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