* Government has sold 5 pct stake so far through plan
* Plan may be extended beyond end June deadline
* Plan offers greater flexibility than other methods
* May help UK sell remaining shares in next year (Adds further details)
By Matt Scuffham
LONDON, May 15 (Reuters) - Britain is considering selling more shares in Lloyds Banking Group by extending a trading facility beyond the current deadline at the end of June, people with knowledge of the matter said.
Morgan Stanley has sold a 5 percent stake in Lloyds since December through a "pre-arranged trading plan" that it was asked to undertake by UK Financial Investments (UKFI), the government agency which manages Britain's stakes in bailed-out banks.
The government's stake has been cut to 19.9 percent from 24.9 percent through the plan, which has so far raised over 2.5 billion pounds ($3.95 billion) for taxpayers. An extension could help the government to return Lloyds fully to private ownership in the next year.
The trading plan is due to end on June 30 but may be prolonged to accelerate the government's exit.
The process, known as a "dribble out", allowed Morgan Stanley to undertake regular sales of the shares provided they were sold above the government's 73.6 pence buy-in price and the sales didn't exceed 15 percent of overall trading volumes.
It effectively allowed the government to continue selling shares in Lloyds in the run-up to this month's election without facing accusations that the sales were politically motivated.
Finance Minister George Osborne said in March that he wanted to sell at least 9 billion pounds worth of stock in Lloyds over the next year. In addition to the trading plan, the government plans to sell a chunk of shares to private retail investors, potentially raising around 4 billion pounds.
Since the March announcement, the value of shares in the bank have risen by 12 percent, enabling the government to sell them at a significant profit. Lloyds Chairman Norman Blackwell said on Thursday it was possible and desirable for Lloyds to return to full private ownership in the next year.
Prior to using the plan, UKFI had raised 7.4 billion pounds through two separate sales, in which shares were sold overnight to financial institutions through a process known as an accelerated bookbuild.
That method limited UKFI's options for selling as there were only a few windows during the year when this was possible. It could only sell during periods immediately after trading updates and when institutions were willing to buy large chunks of shares.
Those limitations may persuade UKFI to extend the trading plan as it offers more flexibility, the sources said.
Shares in Lloyds were little changed at 88.74 pence at 1430 GMT. ($1 = 0.6333 pounds) (Reporting by Matt Scuffham; Editing by Steve Slater and Keith Weir)