The changes will say drivers must be ready to take back control of vehicles when prompted, the government said. The first use of self-driving technology is likely to be when travelling at slow speeds on motorways, such as in congested traffic. However, using mobile phones while driving will remain illegal.
No self-driving cars are currently allowed on UK roads, but the first vehicles capable of driving themselves could be ready for use later this year, the Department for Transport (DfT) said.
The planned changes to the code are expected to come in over the summer. The updates, proposed following public consultation, were described as an interim measure to support the early adoption of the technology and a full regulatory framework is planned to be implemented by 2025.
They will also lay out that users of self-driving cars will not be responsible for crashes.
Instead insurance companies, not individuals, will be liable for claims in many circumstances, the DfT said.
The government announced in April last year hands-free driving in vehicles with lane-keeping technology on congested motorways would be permitted. Automated lane-keeping system technology lets a vehicle drive in a single lane, up to 37mph (60kmph), while maintaining the ability to return control to the driver when required.
Under the new guidance, motorists should be ready take control from an automated system when prompted, for example when approaching a motorway exit. Currently available technology is 'assistive', which means drivers should always retain control, the DfT said.
Experts have suggested a vehicle can stop built-in screens displaying material unrelated to driving when the motorist is required to resume control. But there is currently no comparable system to turn off handheld mobile devices.
Transport Minister Trudy Harrison said updating to the Highway Code will be a "major milestone in our safe introduction of self-driving vehicles". She also claimed their use will "revolutionise the way we travel, making our future journeys greener, safer and more reliable".
The development of self-driving vehicles could create around 38,000 new jobs and be worth £41.7 billion to the UK economy by 2035, according to the DfT.
The Law Commission published recommendations on how the law should be updated in light of self-driving technology in January, concluding human drivers should not be legally accountable for road safety in the era of autonomous cars.
Car safety experts Thatcham Research described the focus on the driver's legal responsibilities as important, adding drivers need to be made aware they "must remain engaged" and be ready to resume driving "at any time".
Eventually, self-driving technology could "improve road safety across Britain by reducing human error, which is a contributory factor in 88% of all recorded road collisions," the government said.
However, the technology for fully-autonomous vehicles has proved difficult to safely introduce and previous estimates of when cars will be able to drive themselves have been unrealistic.
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".
However, he said there is likely to be a "long period of transition" while drivers retain "much of the responsibility for what happens" while operating vehicles.
Ack; BBC News
Ed; Maybe there is a question here for Vince Dover at the next Group meeting! Tell me - how can you watch TV and be ready to take control at a moment's notice? Is that insureable?