It means the taxpayer’s stake in the bank now stands at 7.99 per cent, with more than £17 billion being returned to Government coffers since the lender’s £20.3 billion bailout.
Philip Hammond said: “Selling our shares in Lloyds Banking Group and making sure that we get back all the cash taxpayers injected into it during the financial crisis is one of my top priorities as Chancellor.”
All proceeds from the sales will be used to reduce the national debt.
The Government has progressively sold down its original 43 per cent stake in Lloyds and in October ditched plans for a share sale to the public, opting instead to offload the holding to institutional investors.
Last month Lloyds said it had set aside another £1 billion to meet compensation claims for the mis-selling of payment protection insurance (PPI) as it attempts to draw a line under the scandal.
A Lloyds spokesman said: “Today’s announcement shows the further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back.
“This reflects the hard work undertaken over the last five years to transform the group into a simple, low-risk and customer-focused bank that is committed to helping Britain prosper.”