Users of self-driving cars are permitted to watch television and films on built-in screens under proposed changes to the Highway Code.
It will still be illegal to use a phone behind the wheel, the Department for Transport (DfT) said.
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 for drivers not be responsible for crashes.
Insurance companies rather than individuals will be liable for claims in those circumstances.
These measures – which follow a public consultation – were described as an interim measure by the government to support the early deployment of self-driving vehicles.
A full regulatory framework is expected to be in place by 2025.
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There are no vehicles approved for self-driving on Britain’s roads, but the first could be given the go-ahead this year.
The DfT announced in April 2021 it would allow hands-free driving in vehicles with lane-keeping technology on congested motorways.
Existing technology on the market such as cruise control and automatic stop/start is classified as “assistive”, meaning users must remain fully in control.
The government claims self-driving cars can improve road safety by reducing human error, which is blamed for around 88% of all traffic accidents.
Transport minister Trudy Harrison said updating to 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 went on: “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."
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, according to the DfT.
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 there is likely to be a “long period of transition” while drivers retain “much of the responsibility for what happens”.
He stressed the importance of changes to regulations being communicated to drivers.
“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,” he said.