Tax on UK inheritance

I'm a US/UK dual citizen living in the US and just inherited a fairly large sum of money in the UK. I'm planning to retire to the UK in the next 5 to 10 years so I thought I'd just leave it in the UK and put it in a very conservative investment given the current volatility. So I'm looking at National Savings and Investment products. My questions are:

1) After I get my inheritance, and the estate has paid any taxes, is it right that I won't be liable for any tax in the UK or US?
2) Is it ok for a US resident to invest in NS&I products. They have a Guaranteed Equity Bond that tracks the FTSE but guarantees your principal and lots of fixed interest stuff. Would the Equity Bond be classed as a foreign mutual fund and should I just stick to the fixed interest bonds.
2) Given that I'm in the 25% tax bracket in the US would it be better to buy a bond that's UK tax free or one that's taxed in the UK?

1. You need to file a 3520 to report the investment.
2. I suspect that the N S & I GEB would be caught by the OID regime so you'd have to figure & recognise income before you had it.  You should seek independent financial advice - which I do not give - as to whether this is good product. From a tax perspective you should get a US attorney to give you an opinion as to the GEB as this is highly complex, costly & not straightforward.   
3. UK tax is irrelevant if you are not here right now - you need something that gives the lowest current liability but that you can change in the future.

Thanks, do you know how the IRS taxes UK Gilts, do products like the Guaranteed Growth Bond fall under OID laws as they are described as only paying interest.

Also if I simply put the money in a UK interest bearing saving account I assume I'd just declare the foreign bank interest.

UK gilts generate interest and accrued income - taxable as income & capital gains (exempt in the US but taxable to a US person).

They are "pilan vanilla" - very unlike GEBs...

The FBAR reporting is still required annually.

"Plain vanilla" sounds like just what I want.

can you explain what you mean by "exempt in the US but taxable to a US person"

If I just stash my "nest egg" in the Guaranteed Growth Bond the UK will pay me interest and tax that at 20%. As I'm a US resident can I get that refunded from the UK or do I just apply the 20% I've paid to the UK against the IRS tax on that interest.

Sorry - my typing is rubbish!

There is no UK capital gains tax on selling UK gilts; but this is just a domestic UK rule.  Uncle Sam charges US capital gains tax on gains on sale in any case.

If you receive interest the UK tax is limited as a non-UK resident to the tax withheld & yes you can then claim this on your US tax return as a foreign tax credit.