Confusing percentage points with percentage change is one of the most common errors in financial reporting, political commentary and everyday conversation. The two terms describe different things, and mixing them up can make a change look much larger or smaller than it actually is.
The Short Version
A percentage point is the arithmetic difference between two percentages. If a tax rate rises from 20% to 25%, it has risen by 5 percentage points.
A percentage change is the relative change. That same rise from 20% to 25% is a 25% increase relative to the original value (5 ÷ 20 × 100 = 25%).
Same event. Two very different numbers. Both correct. This is why the distinction matters.
Why They're Often Confused
The confusion arises because both involve the % symbol and both describe how a number changes. But they measure different things:
- Percentage points are a simple subtraction: new percentage minus old percentage.
- Percentage change is a relative comparison: how much did the percentage move, relative to where it started?
When a politician says "we've increased the tax rate by 5%", they might mean 5 percentage points (e.g., from 20% to 25%) or a 5% relative increase (e.g., from 20% to 21%). These are very different claims, and the distinction is rarely stated clearly.
Worked Examples
A central bank raises its base rate from 4.00% to 4.25%.
Change in percentage points: 4.25 − 4.00 = 0.25 percentage points (also called 25 basis points)
Percentage change: (0.25 ÷ 4.00) × 100 = 6.25% increase
Unemployment rises from 4.5% to 5.5%.
Change in percentage points: 1 percentage point
Percentage change: (1.0 ÷ 4.5) × 100 = 22.2% increase
Reporting this as "unemployment rose 22%" would be technically accurate but misleading; "rose 1 percentage point" is the clearer way to describe it.
A party's support falls from 42% to 36% in a poll.
Change in percentage points: −6 percentage points
Percentage change: (6 ÷ 42) × 100 = −14.3%
Which One to Use?
In most cases, when you're comparing two percentages, percentage points is the right framing. It's more intuitive and less likely to mislead. If a savings account rate drops from 5.00% to 4.50%, saying "rates fell by 0.5 percentage points" is much clearer than saying "rates fell by 10%".
Percentage change becomes relevant when you want to express the relative magnitude of a move — particularly for audiences making comparisons across different base levels. A 10 percentage point fall from 50% to 40% is a 20% relative drop. The same 10 percentage point fall from 10% to 0% is a 100% relative drop.
Basis Points: The Finance Version
In financial markets, very small percentage changes are expressed in basis points (bps), where 1 basis point = 0.01 percentage points. So 25 basis points = 0.25 percentage points. A central bank raising rates by "25 bps" means a 0.25 percentage point rise, typically from something like 5.00% to 5.25%.
Basis points exist because small moves in interest rates have large financial consequences, and saying "a 25 basis point rise" is more precise and less ambiguous than "a quarter of a percent".
Spotting the Difference in the Wild
Next time you see a percentage change reported in the news or in a business document, ask yourself: is this a relative percentage change, or is it expressed in percentage points? Headlines often omit this distinction deliberately or carelessly. "Profits rose 30%" is a relative change. "The margin improved by 5 percentage points" (from 10% to 15%) is a different kind of claim.
When the base rate is small, percentage change figures can look alarming even for modest absolute moves. When the base rate is large, percentage point figures can look understated. Understand both and you'll read financial data much more critically.
Calculate the percentage change between any two percentages using the free tool on PercentageHQ.
Percentage Change Calculator →This article is for informational purposes. For financial, economic or regulatory analysis, consult a qualified professional.