From August 16, people who are fully vaccinated or under 18 will no longer be required to isolate, the UK government said.
Instead, they will be advised to take a PCR test as soon as they have been contacted by NHS Test and Trace.
But those fully vaccinated will only be able to avoid self-isolation if they had their second Covid shot at least 14 days before they had contact with an infected person.
"Asking the close contacts of people with Covid-19 to self-isolate has played a critical role in helping us get this virus under control, and millions of people across the UK have made enormous sacrifices by doing this," Health Secretary Sajid Javid said on Wednesday night.
"Every single one of these sacrifices has helped to us protect the NHS and save lives.
"Getting two doses of a vaccine has tipped the odds in our favour and allowed us to safely reclaim our lost freedoms.
"And from Monday we can take another huge step back towards our normal lives by removing self-isolation requirements for double-jabbed people who are contacts of people with Covid-19."
Three quarters of adults in the UK have now received both doses of a Covid-19 vaccine, something praised by Prime Minister Boris Johnson as a "huge national achievement".
A total of 86,780,455 doses have been administered in the UK, with 47,091,889 people (89 per cent of the population) receiving a first dose and 39,688,566 people (75 per cent) receiving both doses.
Pupils returning to school next month will be able to avoid isolation because they fall into the under-18s category.
Ministers are keen to avoid further disruption to schooling.
School bubbles have been scrapped for pupils in England and children are no longer required to wear face masks in class.
Social distancing has also been scrapped for pupils, along with staggered start and finish times.
The government will review testing requirements at the end of September. Currently, secondary school pupils will need to take two onsite tests and two at home.