LONDON, June 22 (Reuters) - The British government is extending a trading plan to help sell down the taxpayer's stake in NatWest Group by another 12 months, as chills in the global economy continue to weigh on the share prices of Britain's biggest banks.

The finance ministry said on Wednesday it will only dispose of its remaining 48.5% shareholding in NatWest "when it represents value for money to do so and market conditions allow."

The government has stepped up efforts to return NatWest to private hands in recent years, after bailing out the lender formerly known as Royal Bank of Scotland at the height of the 2007-2009 global financial crisis.

A string of government share sales returned the bank to majority private ownership in March this year, in a milestone for the lender's long return back to financial health.

The trading plan - which involves drip-feeding stock sales in the market - is one of the government's main methods of reducing its stake, alongside occasional sales of bigger chunks of stock to private investors or directly to NatWest.

The trading plan, which is run by investment bank Morgan Stanley and was launched in August last year, has been extended until Aug. 11, 2023.

The government is targeting fully privatising NatWest through various kinds of sales by 2025-2026.

All sales to date have been struck below the bailout price of 502 pence per share, cementing losses for taxpayers. The government and the bank have long argued that the 45 billion pound rescue was necessary and it was unrealistic to expect a profit.

So far around 703.5 million shares have been sold through the trading plan, raising approximately 1.6 billion pounds ($1.96 billion) for the taxpayer, the government said, adding it would continue to keep other sales options under review.

News of the trading plan extension comes as Britain's cost of living crisis intensifies, with the latest data putting inflation at 9.1% in May.

Shares in NatWest gained more than 3% in early trading to 228.2 pence per share following the announcement. The stock is broadly flat over the year to date, but has fallen more than 10% since hitting its 2022 high in January.

($1 = 0.8170 pounds) (Reporting by Kate Holton and Sinead Cruise; editing by William James and Tomasz Janowski)