The initial plan to offload the 9.2% shareholding was delayed in January because of the turmoil in global financial markets.
Treasury officials said today the bank should be fully back in private hands by early next year.
In a statement, it added that it will receive a further dividend from Lloyds of £130m taking the total received from dividends to £318m.
Economic secretary to the Treasury, Harriett Baldwin, said: “The government has already recovered over 80% of its original investment in Lloyds and today’s dividend payment takes the amount we’ve recovered from the bank to over £16.8bn.”
Taxpayers were called upon for a £20.5 billion package of support to bail-out Lloyds at the height of the financial crisis in 2008/09. Chancellor Alistair Darling used the funding to acquire a 43% holding in the bank which collapsed following its ill-fated merger with Edinburgh-based Halifax Bank of Scotland (HBOS).
The current government has been selling tranches of shares, but only to institutional investors. This final tranche will be offered to private investors.