The data protection lead at a regional charity reads a support ticket that starts, "I asked Copilot to tidy up a reply to a donor complaint." The charity bought thirty Copilot licences last spring, for the leadership team and finance. The person who raised the ticket works in supporter care and has no licence. They used Copilot anyway: Copilot Chat, inside Outlook, signed in with their work account.
None of this is a loophole. Copilot Chat is part of eligible business Microsoft 365 subscriptions, and anyone with a work account can open it. So the useful question for the data protection lead is not whether people use Copilot. It is which Copilot, with which data, and whether anyone has decided anything about it yet.
Two Copilots with nearly the same name
Microsoft has renamed things again. Microsoft 365 Copilot is now Microsoft Copilot, and Microsoft 365 Copilot Chat is now Microsoft Copilot Chat, according to the admin page Manage Copilot Chat (checked 24 October 2026). The consumer app is also called Microsoft Copilot, so the name on screen tells you very little.
For an organisation there are two business versions to keep apart:
- Copilot Chat comes with an eligible business Microsoft 365 subscription. No paid Copilot licence is needed.
- Microsoft Copilot is the paid licence you assign per person. It reasons through Microsoft Graph across the email, meetings, chats, documents and sites that person can access.
Microsoft 365 shows which one someone has. Scroll to the bottom of the home page to your account and there is a label under your name, as Microsoft's support article What Copilot license do I have explains (checked 24 October 2026). Microsoft's Copilot Chat overview (checked 24 October 2026) explains them. Copilot Chat (Basic) means no paid licence and no Copilot in Word, Excel, PowerPoint or OneNote. Microsoft 365 Copilot (Basic) also means no licence, but standard access to Copilot in those apps, depending on your subscription and tenant configuration. Premium means the paid licence.
How much of your work Copilot Chat can see without a licence
Copilot Chat answers mainly from the web. The difference from the paid version is access to work data, and that access is smaller, though not zero.
| Copilot Chat (no licence) | Microsoft Copilot (licence) | |
|---|---|---|
| Answers grounded in the web | Yes | Yes |
| Pasted text and uploaded files | Yes | Yes |
| Email, calendar and meetings | Only in Outlook | Yes |
| Files in OneDrive and SharePoint | A limited set in Outlook, otherwise only what you add | Everything you can access |
| Copilot in Word, Excel, PowerPoint and OneNote | Depends on your label | Yes |
| Advanced agents | Limited | Yes |
Outside Outlook, work data only reaches Copilot Chat when the user puts it there: by pasting text, uploading a file, picking a file by typing a forward slash in the prompt box, or using an agent that has access to shared organisational content. In a few cases Copilot Chat also uses what is open: the file in the Word, Excel and PowerPoint agents, or an intranet page in Edge when the setting for that is on. Uploaded files are stored in the user's OneDrive.
Outlook is different. There, Microsoft says, Copilot Chat can use email, calendar, meetings and chats without a licence, plus a bounded set of files: the user's own OneDrive and other OneDrive files they can access, files shared directly with them, files they have viewed, edited or created, and files from SharePoint sites they visit often. That is how the donor complaint got tidied up. Copilot Chat respects existing Microsoft 365 permissions throughout and shows nothing the user could not already open.
Where a Copilot Chat prompt ends up
With a work account, Copilot Chat falls under Microsoft's enterprise data protection, the commitments in its Data Protection Addendum and Product Terms. Microsoft's page on privacy and protections (checked 24 October 2026) spells out what that means:
- Prompts and responses are processed within the Microsoft 365 service boundary and are not used to train the underlying foundation models.
- Prompts and responses are logged and stored in Exchange, so the same retention policies, audit and eDiscovery apply as for the paid Copilot.
- A green shield at the top of the screen shows that enterprise data protection applies.
One part sits outside those commitments. To use the web, Copilot Chat sends Bing a search query: a few words derived from the prompt, with no user name, domain or tenant ID. For those queries Microsoft acts as an independent data controller under the Microsoft Services Agreement and its privacy statement, not as your processor. Microsoft also says they are not covered by the EU Data Boundary, and that a very short prompt may be sent as the query in full. For a GDPR assessment, that makes web search something to weigh deliberately rather than a default you inherit.
Work account or personal account, same app
The Copilot app accepts both. Someone can sign in with a work account or a personal Microsoft account, and chats, files and protections stay separate for each. Microsoft marks the difference with a different background colour, a "Work" label under the profile and the green shield on the work side.
Someone who uses Copilot at home with a personal account can easily end up in the same app, with the same account, at their desk. Then consumer terms apply, not the agreement your organisation has with Microsoft. Admins can use Tenant Restrictions v2 to control whether personal accounts can sign in from the corporate network. How personal and business accounts differ across other AI tools is covered in free vs business AI accounts.
The settings admins control
They are spread across four places, and they do not all do what their names suggest.
Everything off. Block the Copilot app through Integrated Apps in the Microsoft 365 admin center and Copilot Chat disappears from the Copilot app, Teams, Outlook and the web. That applies tenant-wide, including to staff with a paid licence. Anyone who then opens Copilot Chat sees that it was turned off for the organisation, and you can show a link to your own AI policy there: in the admin center under Copilot, Settings, View all, then Custom link for blocked Microsoft Copilot app.
Off for unlicensed users only. That takes four steps: unpin Copilot Chat, make the Copilot app available only to a group of licensed users, allow Copilot Chat in Teams only for that group, and restrict the button in the Edge sidebar with a policy. Unpinning on its own is not enough, because m365.cloud.microsoft/chat stays reachable.
Edge. The EdgeEntraCopilotPageContext policy decides whether Copilot Chat may use the web page or PDF a user has open. That matters most for intranet pages and web applications that show customer records.
Network. Microsoft asks you to allow the whole *.cloud.microsoft domain and not block individual addresses inside it. So Microsoft does not support stopping Copilot with a web filter on single addresses; the settings above are the supported route.
Five decisions that come with Copilot Chat
Assigning a licence is a purchasing decision. Copilot Chat arrives without one, which is why it so often goes missing from AI policies. Five questions cover it:
- Who may use Copilot Chat? Everyone with a work account, or only some teams? Write down why.
- What data may go in? A draft letter with no names is not the same as a case file. Agree which kinds of data belong in a prompt or upload and which do not. There is a checklist in what not to share with AI.
- What about Copilot Chat in Outlook? Summarising email is exactly what it is for. Check whether that fits teams that handle sensitive correspondence.
- May it search the web? With Bing queries outside the EU Data Boundary, that is a judgement call, not a formality.
- What status does the consumer version get? Personal accounts come with different terms. Give that version its own decision, with the reason recorded.
Each version gets its own line in the AI register; should ChatGPT or Copilot be in your AI register? shows what that looks like, and Microsoft Copilot governance covers the wider decisions. For the licensed users, the main risk is overshared files, which Microsoft 365 Copilot privacy risks works through.
Many organisations name Copilot Chat on a work account as the approved alternative when someone reaches for a free chatbot. That only helps if staff hear it at the right moment. In BeeSensible, versions of the same product sit separately in the catalogue, each with its own risk assessment and its own decision in the register, under Decide. When someone opens a tool the organisation decided differently about, the notice points to the alternative the organisation chose, such as Copilot Chat, and for a business version it can point out that the account is not recognised as a business account. How that looks for staff is under Help, and security teams setting this up alongside Microsoft's own controls can start at AI governance for security teams.
