The changes will allow some surprising measures to be introduced, including allowing drivers of fully autonomous vehicles to watch television while on the road. Users of self-driving cars will also not be responsible for crashes under the Highway Code updates.
Instead, the responsibility will fall to insurance companies rather than individuals according to the Department for Transport (DfT).
Although there are currently no vehicles approved to fully self-drive on Britain’s roads, the first could be given the go-ahead later this year.
But the update to the Code will make it clear that motorists must be ready to take back control of vehicles when needed.
The DfT also intends to allow drivers to watch films on built-in screens while using self-driving cars.
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The DfT previously announced in April last year that it would allow hands-free driving in vehicles with lane-keeping technology on congested motorways.
Transport minister Trudy Harrison said updating the Highway Code will be a “major milestone in our safe introduction of self-driving vehicles”, which she claimed will “revolutionise the way we travel, making our future journeys greener, safer and more reliable”.
She added: “This exciting technology is developing at pace right here in Great Britain and we’re ensuring we have strong foundations in place for drivers when it takes to our roads.
“In doing so, we can help improve travel for all while boosting economic growth across the nation and securing Britain’s place as a global science superpower.”
According to the DfT, the development of self-driving vehicles could create around 38,000 new jobs in Britain and be worth £41.7 billion to the economy by 2035.
Steve Gooding, director of motoring research charity the RAC Foundation, said driverless cars “promise a future where death and injury on our roads are cut significantly”.
But he added there is likely to be a “long period of transition” while drivers retain “much of the responsibility for what happens”.
He also stressed the importance of drivers being made aware of any changes to regulations.
He said: “Vehicle manufacturers and sellers will have a vital role to play in ensuring their customers fully appreciate the capabilities of the cars they buy and the rules that govern them.”
The introduction of the technology is likely to begin with vehicles travelling at slow speeds on motorways, such as in congested traffic.
Following a landmark call for evidence, the Government announced in April last year that vehicles fitted with Automated Lane Keeping System (ALKS) technology could be the first example of self-driving technology.
Designed for use on a motorway in slow traffic, ALKS enables a vehicle to drive itself in a single lane, up to 37mph, while maintaining the ability to return control easily and safely to the driver when required.
The Government said it expects to have a full regulatory framework in place to support the widespread deployment of the technology by 2025, and that it would “ help make the movement of people and goods safer, greener and more efficient”.