Percentage Increase vs. Percentage Points: The Definitive Guide

The Core Difference

1. Percentage Increase

This measures the relative change from an original value. It answers: "How much did it grow compared to where it started?"

• Formula:

  ((New - Old) / Old) * 100

• Use Case: Salary raises, stock growth, price hikes.

2. Percentage Points (pp)

This measures the absolute difference between two percentages. It answers: "What is the detailed arithmetic gap between two percent values?"

• Formula:

  New Percent - Old Percent

• Use Case: Interest rates, tax brackets, election polls, profit margins.

Real-World Example: Interest Rates

Imagine a bank raises its savings interest rate from 2% to 4%.

The "Percentage Point" View

The rate went up by 2 percentage points (4% - 2% = 2%). This is the absolute move.

The "Percentage Increase" View

The rate actualy doubled. The percentage increase is 100%.

((4 - 2) / 2) * 100 = 100%

Key Takeaway: A "small" 2-point move was actually a massive 100% jump in interest earnings.

Why It Matters

In News & Politics

If a politician says "taxes increased by 1%", it is ambiguous.

• Scenario A: Tax rate went from 20% to 21%. (1 percentage point increase). This is actually a 5% tax hike ((21-20)/20).
• Scenario B: Tax bill went from $20,000 to $20,200. (1% relative increase).

In Business Margins

If your profit margin drops from 10% to 8%:

• You lost 2 percentage points of margin.
• But your profitability declined by 20% ((8-10)/10).

How to Calculate Both

Calculate Percentage Points

Simply subtract the old percentage from the new percentage.

• 10% to 15% = +5 pp
• 50% to 45% = -5 pp

Calculate Percentage Increase

Use our Percentage Increase Calculator.

1. Enter the old value.
2. Enter the new value.
3. Get the relative growth percentage.

Summary Table

Tools You Need

• Percentage Increase Calculator: For calculating relative growth (Standard usage).
• Percentage Points Calculator: Specifically for comparing two percentage values.
• Percentage Difference Calculator: For comparing two values without a specific direction.

Mastering this distinction protects you from misleading headlines and helps you manage your finances more accurately.