The actor Rowan Atkinson has warned that new laws on incitement could see comedians being jailed for making jokes related to religion.

In a letter to the Times, the comic star warns the home secretary against introducing anti-terror laws which could make religion a no-go area for satirists.

David Blunkett is putting the finishing touches to legislation which will make it a criminal offence to say anything which could be perceived as incitement to violence on the grounds on religion. Under the new legislation, anyone found guilty of incitement could face up to seven years in prison.

Atkinson says this would be a retrograde step if it was applied to comics. "For telling a good and incisive religious joke, you should be praised. For telling a bad one, you should be ridiculed and reviled. The idea that you could be prosecuted for the telling of either is quite fantastic," he writes.

Number 10 said the legislation would draw a distinction between humour and real hatred. "We are able to tell the difference between comedy sketches and comedy and the people who are trying to whip up and incite religious hatred," a spokesman said.

Government sources say the bill, which is due to be published next month, will apply to those who are "inciting religious hatred" not those who are "criticising religion or religious practices".

Amid claims that the new laws could be applied to football crowds who chant sectarian songs, the spokesman said the legislation would tread a careful line. "We are taking care to balance the right to free speech with the right to practice religion," said Number 10.

Atkinson, who once added the voiceover "and the search goes on for the Ayatollah Khomeini's contact lens" to footage of Muslims praying, says it should be for audiences and not the law to determine what is in good taste.

"I believe it is the reaction of the audience that should decide the appropriateness of a joke, not the law of the land," he said.