Leading cancer groups have joined with more than 800 charities to urge Chancellor of the Exchequer George Osborne to drop plans to cap tax relief on charity donations to £50,000, or 25% of a donor's income, whichever is the greater.

Mr Osborne told the Daily Telegraph this week that he was "shocked" to find that some of the UK's very wealthiest people have organised their tax affairs so that they are regularly paying "virtually no income tax," and that one of loopholes they use to do this involves claiming tax relief on charity giving. While the government is still "looking at making sure we are still encouraging philanthropy and charitable giving," this form of tax avoidance "is a specific issue we can deal with," he said.

However, the charities’ Give It Back George campaign, which is calling for the planned "charity tax" to be dropped, have written to the Chancellor warning him of the "clear danger that this measure could have the unintended consequence of disincentivising the donation of large gifts to charity. Charities rely heavily on major philanthropy of this kind, and any reduction in giving could be devastating for the many vulnerable people who rely upon our services," they have told him.

Surveys indicate that £11 billion is given to charity every year by the general public, but this does not include gifts from the very wealthy, and research suggests that, in 2009/10, there were an additional 80 gifts of £1 million or more from individuals worth £782 million, says the campaign. 45% of the total amount given in 2009/10 was from 7% of donors, and most of these are the higher-rate taxpayers who could get snared by the new cap, it adds.

Cancer Research UK, which receives no government funding and is completely reliant on public generosity, is "extremely concerned" about the Chancellor's proposals, said the charity's chief executive, Harpal Kumar. "People who donate substantial gifts to charity are likely to be deterred by this new measure, which is completely at odds with the government's commitment to nurture a culture of philanthropy and make it more attractive to give," said Dr Kumar, adding: "we urge the Chancellor to amend this measure so that charitable donations are exempted from the cap."

The proposal is "bad news for cancer, bad news for care at the end of life, bad news for support for the aged," added Marie Curie Cancer Care chief executive Thomas Hughes-Hallett, speaking to the Evening Standard newspaper. "It is the vulnerable in society who I'm afraid are going to suffer from an ill-thought-through attempt to clamp down on tax avoidance," he warned.

And Mike Hobday, director of policy and research at Macmillan Cancer Support, stressed the need for the government to meet with charities to discuss this proposal.

"We recently opened a new cancer unit - the University College Hospital Macmillan Cancer Centre - worth £100 million, which will deliver high-quality services to thousands of cancer patients. This is precisely the type of project that needs commitment and sizeable donations. Macmillan wants to continue to provide these types of services as the number of people with cancer in the UK is set to double to four million by 2020," he said.

If Ministers "are serious about supporting major charitable donations and philanthropy, they must review this proposal," said Mr Hobday.