The shares will be offered to retail investors at a discount of 5 percent to the market price, with a bonus share for every 10 shares for those who hold their investment for more than a year. The value of the bonus share incentive will be capped at 200 pounds per investor, the Treasury said in a statement.
Lloyds needed to tap 20.5 billion pounds from the public purse to avert collapse at the peak of the financial crisis in 2008, which left the government with a 43 percent stake.
Britain's government has recouped almost three-quarters of the taxpayer cash used in the rescue of the bank through sales of shares to institutional investors. It now owns just under 12 percent of the lender.