The Scottish Conservatives have called on the chancellor to "show some common sense" and abandon plans to implement the "cruel family farm tax".
The new warning has been issued following the release of research by CBI Economics, which surveyed over 4,000 farms and businesses across the UK.
The findings revealed that around half of farmers have either paused or cancelled investment in their businesses due to the inheritance tax proposals.
Additionally, more than a third have deferred or reduced investment, while 10% have downsized their farming operations.
The new IHT rules will see the full 100% relief from inheritance tax restricted to the first £1m of combined agricultural and business property, from April 2026.
Tim Eagle, who is Scotland's shadow rural affairs secretary, said the new figures illustrate the “devastating effect” that the proposed tax is already having on farm confidence, even before the it is implemented.
He warned that Scottish farmers are being hit particularly hard by a “double whammy”: uncertainty from the UK level and a lack of clarity from the SNP on future agri funding.
“The findings of this extensive research are eye-opening and confirm what those opposed to Labour’s cruel family farm tax have long feared," the MSP for Highlands said.
“Even before it is introduced it is putting off farmers from investing and is pushing many of them to downsize or putting plans to sell.
"The figures show the devastating impact the announcements in Rachel Reeves’ budget have had over the last six months on our farmers and the industry."
It comes as NFU Scotland has also issued a strong warning that UK government tax policies are jeopardising the future of farming and food production in the country.
In a formal letter to Chancellor Rachel Reeves, the union outlined serious concerns over the fiscal measures announced in the autumn budget on 30 October.
Mr Eagle echoed this, saying that the Labour government "needs to show some common sense" in the wake of the industry's warnings and the CBI's research.
"It risks future food security, will destroy livelihoods, and have a hugely damaging effect on our rural economy," he concluded.
