Family farms could be forced to sell 20pc of their land to pay crippling inheritance tax bills which would wipe out their annual profits for 10 years, according to new research.

Chancellor Rachel Reeves announced in her autumn budget that inheritance tax relief on agricultural assets would be capped at £1m - with a 20pc tax above that value.

The move sparked a furious response from farmers who fear it will devastate multi-generational rural businesses. It also sparked the launch of the EDP's "Fair deal for farmers" campaign, calling for the decision to be reversed.

Ministers have insisted that only around a quarter of farmers – the largest and wealthiest landowners – will be affected.

But new modelling from the Country Land and Business Association (CLA) suggests the tax changes could prove a "death sentence" for many small and medium-sized farms.

According to the CLA's analysis, a typical 200-acre farm owned by an individual with an expected annual profit of £27,300 would face an inheritance tax liability of £435,000.

If spread over ten years, this would require the farm to allocate 159pc of its profit each year to cover the tax liability, says the study - and successors would be compelled to sell 20pc of their land to settle the bill.

The CLA says its model highlights that family-run farms – typically "asset-rich but cash-poor" – would be forced into "a cycle of stagnation, asset sales, or debt".

Norfolk farmer Gavin Lane, deputy president of the CLA, said: "Either the government isn’t being honest with the public about the true impact of these reforms, or they don’t understand the nature of rural businesses. I'd like to believe it is the latter and that they are prepared to listen to our input rather than continually trying to dismiss it.

“While they frame this as a tax on the wealthy, the reality is that ordinary family farms will be hit just as hard.

"Asking farms to use their income to pay a huge capital tax bill over ten years, if indeed it is possible, will threaten the future of investment and the viability of the business."

Asked about the impact of the reforms, a Number 10 spokeswoman said: “It remains the case that the vast majority of farmers won’t be impacted by the change, and it remains the case that currently, 40pc of agricultural property relief has been going to the 7pc of the wealthiest claimants, which isn’t sustainable."