Family businesses have warned they could face devastation if Labour changes inheritance tax rules. It is reported Labour could introduce a consultation on inheritance tax this autumn if it wins the election.

There is concern at claims this could feature changes to business relief, which spares families tax bills when an enterprise is passed between generations.

Neil Davy of Family Business UK sounded the alarm. He warned that without the relief “there is a risk that family-owned businesses would have to be sold, broken up or seek outside investment upon the death of the head of the business, accompanied by the loss of hundreds or thousands of jobs”.

He told the Sunday Express: “Family businesses are motivated by a desire to pass the business on to the next generation.

"They have a deep sense of responsibility, not only to future generations of their own family, but to their employees and the community in which they are rooted and operate.

“To that end, it’s vital that all major parties commit to retain business relief in the inheritance tax regime.”

Family businesses, he added, “contribute £225billion per year to the Treasury in taxes and employ 14 million people”.

It is reported that options under discussion would make it more difficult to “gift” money and assets, including farmland, tax-free.

A “senior Labour source” was quoted as saying: “We have to show we are serious about borrowing and raising revenue from taxes if investors are going to walk in step with us.

"These measures are part of unlocking wealth and putting it to work.”