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Microsoft 365 licensing

Exchange Online Plan 1 vs Plan 2: which do you actually need?

Microsoft’s email-only plans are the cheapest way to get an Exchange mailbox, and the difference between them is narrower than the price gap suggests. Most small businesses need Plan 1 or Business Basic; Plan 2 earns its price only if you need legal holds, data loss prevention or a very large archive.

  • Updated 5 October 2026
  • 3 minute read
  • Written by our UK engineers

Prices are Microsoft’s UK list prices per user per month on an annual commitment, excluding VAT, as shown on Microsoft’s Exchange plans page in October 2026. Resellers set their own prices.

Plan 1, Plan 2 and Business Basic side by side

Exchange Online Plan 1Exchange Online Plan 2Microsoft 365 Business Basic
Price (annual, ex VAT)£3.10£6.20£5.40
Mailbox50 GB100 GB100 GB
Archive mailbox50 GB100 GB, auto-expanding to 1.5 TB50 GB
Litigation hold and In-Place HoldNoYesNo
Data loss preventionNoYesNo
Inactive mailboxes (keep a leaver’s mail)NoYesNo
Teams, OneDrive, web Office appsNoNoYes
Desktop Office apps, including OutlookNoNoNo

All three include spam and malware filtering, Outlook on the web, mobile access, shared mailboxes, calendars and delegate access. Shared mailboxes need no licence of their own up to 50 GB.

What Plan 2 actually adds

For twice the price, Plan 2 adds compliance features rather than everyday ones:

  • A bigger mailbox and a much bigger archive. 100 GB instead of 50 GB, and an archive that starts at 100 GB and, with auto-expanding archiving switched on, grows to 1.5 TB.
  • Litigation hold and In-Place Hold. Mail can be preserved — including anything a user deletes — for a legal case, investigation or regulator.
  • Data loss prevention. Policies that spot and block outgoing email containing things like card numbers or National Insurance numbers.
  • Inactive mailboxes. A leaver’s mailbox can be kept on hold after their licence is removed.
  • Voicemail. Plan 2 is the only standalone Exchange plan with voicemail and third-party voicemail integration.

If nobody in your business has asked for a legal hold or a DLP policy, you probably do not need Plan 2. If a mailbox is outgrowing 50 GB, archiving old mail or moving that user to Business Basic’s 100 GB is usually cheaper. Our guide to how long to keep business emails covers what UK businesses actually have to retain.

What neither plan includes

Both plans are email only: no Teams, no OneDrive, no SharePoint and no Office apps. The one that catches people out is desktop Outlook. Microsoft’s service description says that to connect Outlook for Windows or Mac to an Exchange Online Plan 1 or Plan 2 mailbox, the app must first be licensed through an account that includes the Microsoft 365 desktop apps — for example Microsoft 365 Apps for business. Outlook on the web and the Outlook mobile apps (on screens up to 10.1 inches) are included.

So Plan 1 plus a desktop Outlook licence costs more than Plan 1 alone, and the comparison with Business Standard, which includes the desktop apps, becomes closer. Our Business Basic vs Standard vs Premium guide covers those plans.

Plan 1 or Business Basic?

For £2.30 more a user, Business Basic doubles the mailbox to 100 GB and adds Teams, 1 TB of OneDrive storage and the web and mobile Office apps. If your team will use any of those, Basic is the better buy. If you only want email and already have another way to meet and share files, Plan 1 is the cheapest proper Exchange mailbox Microsoft sells.

Exchange Online Kiosk

Microsoft also sells Exchange Online Kiosk for frontline staff who only read email in a browser or on a phone. Its mailbox is just 2 GB, there is no archive, and desktop Outlook and public folders are not supported. It suits shared devices and shift workers, not office staff.

Where hosted Exchange fits

We will be straight: at £8.00 + VAT, our hosted Exchange mailbox costs more than Plan 1 and has the same 50 GB mailbox. Desktop Outlook needs its own licence with us too, just as it does with Exchange Online. People choose hosted Exchange for other reasons:

  • Mail held and supported only in the UK, by a named team, rather than in a global service.
  • No annual commitment — the Microsoft prices above are for an annual subscription.
  • Your own administrators running mailboxes in the SolidCP control panel.
  • A like-for-like move off your own Exchange server, with public folders and permissions intact.

The trade-off to weigh is that the new Outlook for Windows does not support hosted Exchange from any provider; classic Outlook does, and is supported until at least 2029. Our hosted Exchange vs Microsoft 365 comparison sets the two side by side, and we supply both, so we will tell you which suits.

Sources

Questions

Frequently asked

What is the difference between Exchange Online Plan 1 and Plan 2?

Plan 2 doubles the mailbox to 100 GB, adds an archive that can grow to 1.5 TB, and includes litigation hold, In-Place Hold, data loss prevention, inactive mailboxes and voicemail. Plan 1 has a 50 GB mailbox and 50 GB archive. In the UK, Plan 1 is £3.10 and Plan 2 £6.20 a user a month on an annual commitment, ex VAT.

Does Exchange Online Plan 1 include Outlook?

It includes Outlook on the web and the Outlook mobile apps. It does not include desktop Outlook for Windows or Mac, which must be licensed separately, for example through Microsoft 365 Apps for business.

Is Exchange Online Plan 1 cheaper than Microsoft 365 Business Basic?

Yes — £3.10 against £5.40 a user a month. Business Basic adds a 100 GB mailbox instead of 50 GB, Teams, 1 TB of OneDrive storage and the web and mobile Office apps.

Do shared mailboxes need an Exchange Online licence?

Not up to 50 GB. A shared mailbox needs an Exchange Online Plan 2 licence to grow to 100 GB, or to be placed on litigation hold. Our guide to shared mailbox licensing covers the detail.

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