UEFA have threatened England with a ban from playing and hosting Euro 2028.
Prime Minister and Arsenal fan Sir Keir Starmer is set to push forward with plans to implement a football regulator.
The new legislation is set to prevent clubs forming a breakaway-style Super League and "protect clubs" by "ensuring their financial sustainability".
Britain will be the first country to have a football watchdog in place and Uefa are said to be unhappy about it.
The European governing body has slammed the proposed "interference in the running of football".
And in a leaked letter sent to Culture Secretary Lisa Nandy, Uefa general secretary Theodore Theodoridis has threatened to strip England from competing in tournaments.
Theodoridis wrote: "We do have concerns remaining... as normally football regulation should be managed by the national federation.
"One particular area of concern stems from one of Uefa's fundamental requirements, which is that there should be no government interference in the running of football.
"We have specific rules that guard against this in order to guarantee the autonomy of sport and fairness of sporting competition.
"The ultimate sanction for which would be excluding the federation from Uefa and teams from competition."
This would mean that English clubs could be banned from European tournaments like the Champions League.
Uefa also hit out at the football regulator's proposed "backstop powers".
The move could see the watchdog be allowed to intervene in talks between the Premier League and EFL over funding.
On this, Theodoridis said: "Mandating redistribution which effects the competitive balance in the game and wider European competition would be of concern to us.
"We also fear that having a third party intervene in redistribution would likely prevent amicable solutions being found.
"As we see it, the 'backstop' power, while intended as a safety net, should be carefully reconsidered to avoid undermining these fundamental principles."