UKFI manages the government's ownership in Lloyds Bank, and said Tuesday it would sell a 7.5% stake in the company, worth about 4.2 billion pounds.
The sale is limited to institutional investors, and should help trim the government's stake in Lloyds to 25%, from the initial 43% it acquired during the financial crisis. A previous sale took place in September.
In 2009, Lloyds Bank accepted cash injections by the British government in order to stabilize its books, which were saddled with toxic assets.
Although Lloyds Bank had been conservatively managed in the years leading up to the crisis, the government had pressured it to merge with the less-conservative HBOS, which saddled the combined company with about 35 billion pounds of cumulative losses on its portfolios of loans.
Since then, the company has improved its books, and it returned to profitability under the new leadership of Lloyds Bank's CEO Antonio Horta-Osorio
Horta-Osorio was appointed chief executive in 2011 and has made an effort to simplify the business by focusing on lending to U.K. households and businesses.
Lloyd's is trading at around 79 pence in London this week, greater than the 73.6 pence a share average that the government paid during the crisis.
The U.K.'s finance ministry said Tuesday that its main concern is to get the best value for taxpayers, while maximizing support for the economy and restoring the company to private ownership.
There are no exact dates of when the Treasury plans to give taxpayers the opportunity to purchase Lloyd's directly, but officials have said they will do it "when the time is right."