Britain will sell a further 7.5 percent stake in Lloyds Banking Group, worth about 4.2 billion pounds ($6.9 billion), via a placing to institutional investors, UK Financial Investments (UKFI) said on Tuesday.
The government began to offload its 39 percent shareholding in Lloyds last September, selling off a 6 percent stake to institutions such as pension funds and insurers.
That sale was seen as a milestone in Britain's recovery from the 2008 financial crisis, during which taxpayers pumped a combined 66 billion pounds into Lloyds and RBS.
(Read more: Lloyds returns to profit, bonus pool $655 million)
Britain's finance ministry said on Tuesday that its priority was "getting the best value for the taxpayer, maximizing support for the economy and restoring private ownership".
"Building a stronger banking system is a core part of the government's long-term economic plan to deliver greater economic security," a Treasury spokesman said.