Microsoft 365 Copilot
There are two Copilots, and only one of them can read your files
The difference between the free Copilot Chat and the paid Microsoft 365 Copilot licence is not a feature list. It is which data the tool can reach, and therefore which risk you have just taken on. Most organisations buy before they know which one they are buying.
What you already have
Copilot Chat, and the upload button
If your organisation has an eligible Microsoft 365 subscription, Copilot Chat is already there at no extra cost, pinned in Teams, in Outlook and in the browser. It is grounded in the web and in whatever a user uploads to it. It cannot reach Microsoft Graph. It does not know your SharePoint exists.
That sounds like the safer option, and in one respect it is. But read the sentence again: whatever a user uploads to it. The risk in the free tier is not that Copilot surfaces your data. It is that your staff carry data to it by hand, a file at a time, in a tool your governance has probably never named.
The free tier does not read your files. It waits for someone to bring them.
What the licence buys
Microsoft 365 Copilot, and the problem of finding things
The paid licence adds grounding in your work data through Microsoft Graph. It reasons over SharePoint, Teams, Outlook, OneDrive and anything you have indexed with Graph connectors — inside the permissions each user already holds. It also moves Copilot into the applications themselves rather than leaving it in a chat window.
It respects those permissions perfectly. That is the problem. A document that was safe because it was buried in a site nobody remembered becomes a document that is one plain-English question away from anyone who technically had access all along.
Copilot does not create an over-sharing problem. It finds the one you already had.
Copilot Chat — included
- Grounded in the web
- Reads files a user uploads, within that conversation
- Cannot reach SharePoint, Teams, Outlook or OneDrive content
- Declarative agents, built on instructions and public websites, at no cost
- Agents that reach SharePoint or Graph connectors are off by default and separately metered
- No real-time voice
Microsoft 365 Copilot — paid
- Everything opposite, plus grounding in your work data through Microsoft Graph
- Reasons over SharePoint, Teams, Outlook, OneDrive and Graph connectors
- Operates inside each user's existing permissions — it grants nothing new, and hides nothing that was already open
- Appears inside Word, Excel, PowerPoint and Outlook, not only in a chat pane
- Full agent capability
- Annual commitment; the same licence billed monthly costs materially more
The dividing line is Microsoft Graph. Everything else is detail.
Enterprise data protection
What Microsoft commits to, and the two places it stops
Both tiers sit under Microsoft's enterprise data protection. Prompts and responses fall under the Data Protection Addendum and the Product Terms: encrypted in transit and at rest, isolated to your tenant, subject to your retention policies, auditable, reachable by eDiscovery, and governed by your DLP settings and sensitivity labels. Prompts, responses and the data reached through Graph are not used to train foundation models. The EU Data Boundary applies.
That is a stronger position than most organisations assume, and it is worth saying plainly. Then there are two exceptions, and they are the ones that belong in your DPIA.
Web search queries are not covered. When Copilot searches the web, that query is handled by Bing under the Microsoft Services Agreement, and Microsoft acts as an independent controller for it — not as your processor. A different relationship, different terms, and one your record of processing almost certainly does not mention.
Agents are not covered by default. Each agent carries its own privacy statement and terms of use. An agent somebody built in an afternoon is a third party you have not assessed, sitting inside a tool you have told the board is safe.
The licence decides which data. The two exceptions decide the paperwork.
What it costs
UK list prices, before any agreement you negotiate
- Microsoft 365 Copilot added to an existing subscription — £13.80 per user per month on an annual commitment, or £19.32 billed monthly
- Business Standard with Copilot — £18.10 annual, £21.72 monthly
- Business Premium with Copilot — £24.60 annual, £29.52 monthly
All excluding VAT, per user, per month. The add-on rate is currently reduced from £16.10, so budget on the assumption that it may not hold. The gap between annual and monthly billing is roughly forty per cent — on two hundred users that is the difference between about £33,000 and £46,000 a year, which is worth knowing before somebody clicks monthly for flexibility.
These are list prices. If you buy through a partner or an enterprise agreement, yours will differ.
Before you buy
Three things, in this order
One. Find out what Copilot would find. The paid licence is only as safe as your permissions are tidy. Twelve questions will tell you whether the groundwork is done, and none of your answers leave your browser.
Two. Choose the tier on data, not on features. If the answer to "should it read our SharePoint" is anything other than a confident yes, the free tier is not a cheaper version of the paid one. It is a different decision, and for many organisations it is the right one for another year.
Three. Write the two exceptions down. Web search and agents belong in your DPIA and your record of processing, whichever tier you choose. This is the part that gets missed, and it is the part a regulator would ask about first.
Current at 3 September 2026. Microsoft renames and repackages this area frequently, and list prices move. The licensing structure above is drawn from Microsoft's own product and licensing documentation, but check it against your agreement before you commit budget — and tell us if you find it has changed, because we would rather correct this page than leave it wrong.