Theresa May and her senior ministers are formally discussing for the first time what the UK’s long-term relationship with the EU should be.
The EU has agreed that Brexit negotiations can now move on to discussing the UK and the EU’s future relationship.
Until now they have only been discussing “divorce” issues like how much money the UK owes.
Not everyone agrees how closely aligned the UK should stay to EU trade rules.
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The UK voted to leave the European Union in June 2016 and Brexit is due to happen at 23:00 GMT on 29 March, 2019.
The full cabinet will hold another discussion on Tuesday.
BBC assistant political editor Norman Smith said there was a “clear divide” between ministers, with some like Chancellor Philip Hammond and Home Secretary Amber Rudd calling for the UK to stick closely to the EU’s single market to preserve access for British firms.
On the other side others, like Foreign Secretary Boris Johnson and Michael Gove, want more divergence so the UK has more freedom to strike its own trade deals with other countries.
The EU’s chief negotiator Michel Barnier has said there is “no way” the UK will be able to select just the good bits of all the possible arrangements.
“They have to face the consequences of their own decision,” he said.
What happens in the meantime?
After the UK leaves the EU in March 2019, but before the final “end state” is reached, the government wants a temporary “implementation period” of about two years.
This is what negotiations are expected to focus on in the coming weeks.
Later in the House of Commons – from about 15:30 GMT – Mrs May will tell MPs she wants “access to one another’s markets” to continue “as now” during this period.
The UK will also negotiate, and “where possible” sign trade deals, which would kick in after the end of the implementation period, she will say.
She will also say that during this period the UK will register people arriving from the EU to prepare for the new border controls promised after Brexit.
The EU’s negotiating position makes clear that it expects the UK to observe all of its rules – including on freedom of movement – and accept the jurisdiction of the European Court of Justice during the implementation, or transition, period.
Labour’s shadow international trade secretary Barry Gardiner has said it would be a “real problem” for business if, as expected, the EU did not start talking about trade until March.
He has also said Labour would not put a time limit on a post-Brexit transition phase, because the expected two-year period would be “extremely tight”.