* New plan enables gradual sale of shares to market
* UK says step towards taxpayers getting money back
* Shares will not be sold below government buy-in price
* UK could sell shares worth around 3 bln stg -sources
* Morgan Stanley will manage sale process (Adds further details on method of sale, background)
By Matt Scuffham
LONDON, Dec 17 (Reuters) - Britain will sell more shares in Lloyds Banking Group over the next six months, moving the bailed-out bank another step towards a full return to private ownership and recouping more taxpayer cash.
Britain's finance ministry and UK Financial Investments (UKFI), which manages the Lloyds' stake, said on Wednesday the shares would be sold by Morgan Stanley through a "pre-arranged trading plan".
"It is another step in reducing our national debt and in getting taxpayers' money back," Britain's Finance Minister George Osborne said in a statement.
Britain pumped 20.5 billion pounds into Lloyds to rescue it during the 2007-2009 financial crisis, leaving it with a 40 percent stake in the bank. It currently holds a 25 percent stake, having raised 7.4 billion pounds through two share sales in September last year and March this year.
Banking sources said UKFI could sell around 3 billion pounds worth of shares under the plan, based on average trading volumes over the past 6 months. That would take the government's stake down to around 19.5 percent.
Lloyds on Tuesday passed a new annual health check of British banks, strengthening its chances of paying a dividend next year and making it easier for the government to sell off its remaining shares.
The process for selling the shares will be different from the two previous sales made by UKFI, in which shares were sold overnight to institutions via a process known as an accelerated bookbuild.
That method limited UKFI's options for selling the shares 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 at times of the year when institutions were willing to buy large chunks of shares.
The new process, known as a dribble-out offer, gives the government greater flexibility in the size and timing of sales. It was used by the U.S. Treasury to sell most of its stake in Citigroup in 2010, which was also handled by Morgan Stanley.
The Treasury said the new plan would enable Morgan Stanley to sell shares gradually in the market over time in an orderly and measured way. It confirmed that the shares would not be sold at a price below the average the previous government paid for them, which was 73.6 pence each.
The first two sales of shares in the bank by the government were priced at 75 pence and 75.5 pence respectively.
UKFI said the sale of Lloyds' shares might not begin until the New Year and would be completed no later than June 2015.
Lloyds' shares were down 1.1 percent to 76 pence by 1535 GMT. (Additional repoting by Steve Slater. Editing by Jane Merriman)