If you manage Microsoft 365 licences for your organisation — or even for your own household — October 2026 has served up a significant double-header from Redmond. Microsoft has simultaneously slashed OneDrive storage for its family-oriented subscription tiers and opened up Copilot AI access to all plan members for the first time. For IT teams, these two changes land in the same week and require fast, clear decisions. Here's everything you need to know to get ahead of both.

The Big Storage Cut: From 6TB Down to 2TB

Let's start with the headline that's generating the most noise.

Microsoft is replacing individual 1TB OneDrive allocations with a shared 2TB storage pool for Microsoft 365 Family and Premium subscribers.

Until now, the maths was straightforward:

Microsoft 365 Family and Premium subscriptions allowed users to share their subscription with up to five additional people, with each person receiving 1TB of OneDrive cloud storage — giving a family of six a combined 6TB of storage.

That's now gone.

This represents a 66.7% reduction in total available storage.

Understandably,

subscribers are criticising the reduction because families that previously had up to 6TB could lose two-thirds of their combined storage.

Who's Affected and When?

The rollout is phased, but the clock is already ticking for some users.

The new model applies to new and upgraded subscriptions starting October 8, 2026. Existing Microsoft 365 Family and Premium subscribers will generally transition after their first subscription renewal on or after May 2, 2027.

That's important context for IT administrators managing licences at scale.

Windows Central noted that switching to an eligible plan earlier — such as upgrading from Microsoft 365 Family to Premium — can trigger the shared storage model immediately.

In other words, don't upgrade plans without understanding the storage implications first.

What Does a Shared Pool Actually Mean?

With the new structure, those same six individuals must now share just 2TB. If split evenly, this results in approximately 333GB per person — a stark contrast to the individual gigabytes previously guaranteed.

Microsoft describes the change as "more flexible cloud storage," emphasising that users will retain their own private accounts and files within the shared ecosystem.

However, for families or small teams where multiple members are heavy OneDrive users, the practical impact could be significant.

The Microsoft 365 Pro plan, which costs $99 per month, will offer a 5TB shared storage pool

— a middle-ground option for those who need more room.

What About Business Plans? A Brighter Picture

While consumer-tier subscribers are losing storage, business customers are actually seeing improvements on the mailbox side — though price rises are also in play.

Microsoft is increasing mailbox storage allowances for users on several popular Microsoft 365 Business plans.

Specifically,

from July 2026, Microsoft increased the allowance to 100GB per user for customers licensed with Microsoft 365 Business Basic, Business Standard, and Business Premium

— double the previous 50GB limit.

The storage increase is applied automatically by Microsoft on licence renewal, after 1st July 2026. There is no migration, configuration, or administrative work required from your IT team to benefit from the expanded storage allowance.

However, this good news comes with a cost.

Across many Microsoft 365 licences, pricing increased by approximately 8–17%, depending on licence type.

Business Basic went up 17% and Business Standard 12% — but Business Premium stayed at the same price.

For IT teams managing larger seat counts, this is a meaningful budget line to revisit at renewal time.

The AI Sharing Change: Copilot Opens Up to the Whole Family

Alongside the storage cut, Microsoft is making a change that's actually a win for end users:

Microsoft is finally removing the long-standing limitation that restricted Copilot AI features exclusively to primary account owners.

In 2025, Microsoft bundled AI-powered Office features into Microsoft 365 Personal and Family plans, but only the primary account holder could use the AI features. With this change, Family and Premium subscribers will be able to share Copilot and other AI features with up to five additional members.

A Consolidated AI Usage Allowance

The change isn't just about access — it's about how usage is measured.

Microsoft is replacing separate Copilot feature limits and monthly AI credits with a single shared AI usage allowance. Instead of individual limits for features such as Chat, Deep Reasoning, and AI tools across Microsoft 365 and Windows apps, subscribers will use one allowance across supported Microsoft AI products and services.

For Family and Premium subscriptions, the allowance will also be shared among family members. Microsoft also confirmed that Premium and Pro subscribers will be able to purchase additional AI usage when needed.

This shared model mirrors the new storage approach — centralised pools replacing individual allocations. The critical question for IT managers is one that Microsoft hasn't yet answered:

Microsoft has not revealed how much AI usage each subscription will include or how different Copilot features will consume the allowance. The company has also not announced pricing for additional AI usage, leaving questions about how quickly families might exhaust their shared allocation.

Managing AI Access for Younger Users

One practical benefit for family plan administrators:

subscribers will also be able to manage AI access permissions for family members who are minors.

This is a welcome governance feature, particularly as Copilot becomes more deeply embedded in everyday Office workflows.

Pay-As-You-Go Storage: Microsoft's Answer for Overages

For business customers who need more space, Microsoft has a new solution entering general availability.

Microsoft 365 SharePoint Storage and Microsoft 365 OneDrive Storage are now in public preview. Based on a pay-as-you-go pricing model, these services make it easier to add additional storage for active SharePoint content and OneDrive accounts when they grow beyond the storage included with your Microsoft 365 subscription.

Additional OneDrive storage costs $0.20/GB/month.

For archived content, the rate is considerably lower.

Consider a tenant using 200GB above its quota, with 100GB in archived storage and 100GB in active storage. At listed rates of $0.05 per GB for archived storage and $0.20 per GB for active storage, the estimated monthly charge would be $25.

Pay-as-you-go billing is turned off by default: admins can set it up via the Microsoft 365 admin centre, with options to set budget limits and alerts.

This is a sensible safeguard, but it does mean IT teams need to proactively configure it before storage issues escalate.

Practical Tips for IT Teams: Act Now

These changes demand immediate attention. Here's what your team should be doing this week:

Switching to an eligible plan earlier can trigger the shared storage model immediately

, so hold off on any unplanned plan changes until you've mapped the storage impact.

The storage increase will be applied automatically by Microsoft on licence renewal, after 1st July 2026.

Confirm your tenants have transitioned and consider retiring any Exchange Online Plan 2 add-ons purchased solely for extra mailbox space.

Audit your current seat count and usage. A Microsoft 365 admin centre report on sign-in activity over the past 90 days will quickly surface unused seats

— eliminating them before renewal reduces costs.

The Bigger Picture: Microsoft's Shift to Shared Pools

These changes aren't isolated product decisions. They represent a deliberate strategic shift by Microsoft toward shared resource pools — for both storage and AI — replacing the per-person allocations that made Microsoft 365's value proposition so compelling for households and small teams.

Microsoft's new storage limits come as consumers are already paying more for Microsoft 365 following the company's 2025 price increases.

For IT teams, the challenge is managing the gap between what users were promised and what they're now receiving, while also taking advantage of the genuine improvements — particularly for business plans — that are landing alongside the cuts.

Conclusion: Don't Wait for the Renewal Notice

The window between now and May 2027 looks comfortable on paper, but the reality is that storage audits, user communications, licence reviews, and PAYG configurations all take time. The organisations that act in October 2026 will be far better positioned than those scrambling when renewal notices arrive.

If your organisation relies on Microsoft 365 for cloud storage, now is the time to review your entire M365 estate — storage allocations, licence mix, Copilot readiness, and budget forecasts. Need help navigating the Microsoft 365 licensing landscape and planning for these changes? Get in touch with our team today for a no-obligation review of your current setup and a clear roadmap for what comes next.