The announcement follows confirmation this morning that the government has sold a further 1% of Lloyds shares through the trading plan.
The latest sales mean that the government has recovered almost £3.5 billion for the taxpayer from the trading plan, bringing the total recovered from Lloyds to over £10.5 billion, and the government’s stake to below 19%.
The trading plan, launched in December 2014, was due to end no later than the 30 June 2015. The extension announced today means that the plan will now end no later than 31 December 2015.
Shares have been sold through the trading plan for an average price of over 80p, above the average 73.6p originally paid for the shares.
Further sales will contribute towards the government's target to sell at least a further £9 billion of Lloyds shares in 2015-2016.
Chancellor George Osborne said:
"The trading plan has been a huge success, with almost £3.5 billion raised for the taxpayer so far. This means we have now recovered over £10.5 billion in total, more than half of the taxpayers’ money put into Lloyds, and we now own under 19% of the bank.
"But we’re determined to get on with the job of returning Lloyds to private ownership. That’s why I’m extending the plan for six months so that we can make even more progress in returning money to the taxpayer and paying down the national debt."
Mark Taylor, Dean of Warwick Business School and former economist at the Bank of England, said:
"This is good news for UK taxpayers and stands in stark contrast to the fortunes of the Royal Bank of Scotland.
"Taxpayers took a 40 per cent stake in Lloyds at the height of the banking crisis, pumping £20bn into it in order to avoid its collapse, which would have had serious consequences for the financial sector.
"Around half of that money has now been repaid and the Government’s holding has also been cut in half, to about 20 per cent, so at this rate taxpayers are on course to get all of their money back. In fact, with Lloyds offering such an improved financial performance, there is a likelihood of a stronger share price going forward so that there may even be a profit for the taxpayer on the sale of the remaining 20% Government stake.
"RBS, meanwhile, is still 80 per cent Government-owned and is reporting losses. This reflects both the scale of the difficulties that RBS had got into as well as the strong management and leadership at Lloyds over the past few years."