The plans were outlined as part of UK chancellor Philip Hammond's Budget statement, and are designed to be in place to allow such testing to take place by 2021.
"The government wants to see fully self-driving cars, without a human operator, on UK roads by 2021," the Budget policy paper said. "The government will therefore make world-leading changes to the regulatory framework, such as setting out how driverless cars can be tested without a human safety operator."
According to the paper, the National Infrastructure Commission (NIC) will also "launch a new innovation prize to determine how future roadbuilding should adapt to support self-driving cars".
Further plans to prepare the UK for a future of electric vehicles were also contained in the chancellor's Budget.
"To support the transition to zero emission vehicles, the government will regulate to support the wider roll-out of charging infrastructure; invest £200 million, to be matched by private investment into a new £400m Charging Investment Infrastructure Fund; and commit to electrify 25% of cars in central government department fleets by 2022," the government said.
The government also said that it would continue the current 'plug-in car grant' scheme until 2020 "to help consumers with the cost of purchasing a new battery electric vehicle". It has allocated £100m of public funds to support the scheme.
In his Budget, the chancellor also committed £10m of funding for UK regulators to help them "develop innovative approaches aimed at getting new products and services to market". The Financial Conduct Authority (FCA) and Ofgem, the UK's energy regulator, have existing 'sandbox' schemes that are designed to help innovative businesses in their sectors test new products, services and business models under lighter touch regulatory conditions.
The chancellor also confirmed that a new Centre for Data Ethics and Innovation will be established "to enable and ensure safe, ethical and ground-breaking innovation in AI (artificial intelligence) and data‑driven technologies".
Recommendations had been made that the government establish a new national institute for artificial intelligence and data science in a report published in October. The report marked the end of a government-commissioned review into growing the artificial intelligence industry in the UK.
"This world-first advisory body will work with government, regulators and industry to lay the foundations for AI adoption, which estimates suggest could benefit households across the UK by up to £2,300 per year by 2030, and increase GDP by 10%," the Budget policy paper said.
The government also said that further recommendations made in the review will also be taken forward using £75m of public money. It said this would include "exploratory work to facilitate data access through ‘data trusts’".
The AI review said the sharing of data between organisations holding data and organisations looking to use data to develop AI could be improved by developing 'data trusts', which the report from the review described as "a set of relationships underpinned by a repeatable framework, compliant with parties’ obligations, to share data in a fair, safe and equitable way".
The chancellor's Budget also revealed plans to address a shortage in digital skills.
A new National Retraining Partnership will see the government work with the Trades Union Congress and the Confederation of British Industry to develop a "national retraining scheme" which will initially focus on addressing skills shortages in digital and construction, it said.
An additional £406m of public funds have also been earmarked for investment in "maths and technical education", to help businesses "recruit people with relevant skills" in future, it said.
Further finance was also outlined to encourage investment in new '5G' infrastructure, including the funding of a 2018 trial of 5G applications and deployment on UK roads, while a new consultation will also be held on "commercial options to improve mobile communications for rail passengers". Trials of the technology on the rail networks will be supported by £35m of public funds, it said.
A new £190m 'Challenge Fund' will also be established to support the deployment of 'full-fibre' broadband networks across the UK, the government said.