SCOTTISH philanthropists have warned that George Osborne's charity tax will have a "disastrous" impact on the amounts business people give away.

Millionaire Glasgow entrepreneur Willie Haughey – who has donated about £7 million through his City Charitable Trust – said the Chancellor's bid to tackle tax dodgers by capping the total which can be given away tax-free, would slash the amount he is willing to give to good causes.

And Aberdeen-based billionaire and philanthropist, Sir Ian Wood, accused Mr Osborne of "taking a massive sledge-hammer to crack a nut".

The criticism came as David Cameron signalled a rethink on the details of his tax-break policy. The Prime Minister said that, while he planned to press ahead with a £50,000 annual cap on the relief given for charitable donations, he would "look sympathetically" at concerns the move would hit funding.

From next year, the total amount of tax relief an individual can claim will be limited to 25% of their income or £50,000, whichever is greater.

Mr Osborne said the policy is necessary to weed out those who avoid tax by funnelling income through charities, sometimes set up in their own names, that donate little to good causes.

Mr Haughey, chairman of Glasgow-based City Refrigeration Holdings, which employs 11,000 people worldwide, told The Herald that under the scheme he would donate up to the threshold, but "not a penny more". His comments come after Sir Tom Hunter yesterday branded the scheme "ill-thought-out and punitive".

Mr Haughey said: "If the Government set a ceiling on what you can give to charity [before tax], that'll be my total amount – not a penny more."

He added: "I'm appalled people might think everybody who gives to charity is doing it to avoid tax, when nothing could be further from the truth. This is a disaster for all charities."

Mr Haughey said his trust was donating an average of £1m a year, with £600,000 gifted to help fund clinical trials into cystic fibrosis research in Scotland.

Sir Ian, chairman of energy services company, the Wood Group, established the Wood Family Trust in 2007 with a goal of investing £50m to community and enterprise initiatives in the UK and Africa.

He said: "It's unhelpful. It doesn't encourage philanthropic giving, but the real tragedy is there are some extremely good charities who are, year-on-year, getting less and less Government funding, and one of their other significant sources of funding is being cut off.

"It will affect everyone's giving to some extent. There's quite good contact between people involved in giving – we often work together on projects – and we were absolutely staggered as to why a Government would hit charities in this way."

A growing number of groups are backing the "Give it Back George" campaign to persuade the Coalition to rethink the proposal.

Martin Sime, chief executive of the Scottish Council for Voluntary Organisations, said the cap could cost Scottish charities "tens of millions" a year at a time when demand for their services was soaring.

Mr Sime said: "With around 50% of the £11bn donated to charities in the UK each year coming from just 8% of donors, the new rules will have a disproportionate effect on charities large and small."

Meanwhhile, a poll today showed nearly nine out of 10 top charity executives believed the tax-relief cap will hit donations from major donors while nearly eight out of 10 called for it to be scrapped. The survey of 120 charity executives by the Charities Aid Foundation found more than half felt the Budget would lead to a significant reduction in income from major donors.