What is the difference between percent and percentage points?

A percentage point is the simple difference between two percentages, while a percent change is that difference relative to the starting value. A margin that goes from 30% to 33% has risen 3 percentage points, which is a 10% increase.

How it is calculated

Change in percentage points = new % - old %

Percent change = (new - old) / old × 100

Use percentage points whenever the thing that changed is itself a percentage: a margin, a tax rate, an interest rate, an occupancy rate or a share of revenue. One percentage point is also 100 basis points, the unit lenders use for interest rates.

Worked example

MeasureBeforeAfterPointsPercent change
Gross margin30%33%+3 pp+10%
Loan interest rate5%4%-1 pp-20%
Wages as % of revenue40%38%-2 pp-5%

"The interest rate fell 1%" is ambiguous: from 5% to 4%, or from 5% to 4.95%? "Fell 1 percentage point" is not.

Common mistakes

  • Writing "margin up 3%" for a 3-point rise. A reader may think margin went from 30% to 30.9%. Write "up 3 percentage points" or "up 3 points".
  • Expecting percent changes to cancel. A 10% rise then a 10% fall does not get you back: $100 becomes $110, then $99.
  • Averaging percentages. The margin for two months together is total gross profit over total revenue, not the average of the two margins, unless revenue was the same in both.

Related terms

  • Gross margin: Gross margin is revenue minus the cost of goods sold (COGS), shown as a percentage of revenue.
  • Month over month (MoM): Month over month (MoM) compares a figure for one month with the same figure for the month before, as a dollar change and a percentage change.
  • Variance analysis: Variance analysis is the process of comparing actual results with a budget, forecast or prior period, measuring the difference and explaining why it happened.

Further reading