Oopsadaisy1
If you are doing a Census return ( a bit late? ) they are only interested in your immediate ethnicity, not where your Grandparents came from. I think on my Passport mine says U.K. citizen, presumably taken from my Birth Certificate when I first applied many years ago.
Same as all census returns in the past really, except in the past they were only asked where they were born and where they lived at the time of the Census return.
Not sure why you think the Governments are interested in helping Genealogists of the future.
Your ethnicity has nothing to do with your citizenship. You may have been born in a country and be a citizen of that country, but your ethnic group could be anything. Most western countries now have a diverse population. So for your ethnic group it is actually relevant what your grandparents are, whether you are black, white, mixed race or whatever. There is no such thing as your 'immediate ethnicity'.
Where you were born does not show your ethnicity, and older census returns simply listed where you were born. So the OP is quite correct is questioning why there are only two options for ethnicity.