The Spaceflight Bill would allow scientists to conduct experiments in zero gravity – paving the way for the development of vaccines and antibiotics, the Department for Transport (DfT) said.
Science minister Jo Johnson said the bill would “cement the UK‘s position as a world leader in this emerging market”.
Under the proposals, the first commercial flight from a UK space port could lift off by 2020.
Mr Johnson said: “From the launch of Rosetta, the first spacecraft to orbit a comet, to Tim Peake’s six months on the International Space Station, the UK’s space sector has achieved phenomenal things in orbit and beyond.
“With this week‘s Spaceflight Bill launch, we will cement the UK’s position as a world leader in this emerging market, giving us an opportunity to build on existing strengths in research and innovation.”
Aviation minister Lord Ahmad said: “We have never launched a spaceflight before from this country.
“Our ambition is to allow for safe and competitive access to space from the UK, so we remain at the forefront of a new commercial space age.”
Grants worth £10m would be made available to help develop commercial launch capability for spaceflight.
The commercial spaceflight market is worth an estimated £25bn over the next 20 years.
The bill will be unveiled in Parliament this week.