What to do with a windfall?

ellesters01

Dear all, 
Hoping for a bit of advice.  I came into some money recently and I'm trying to decide what to do with it.  It's more than enough to  pay off my mortgage.  The mortgage still has 10+ years to run and I have no other debts.  On the face of it, seems an obvious move but as always the devil is in the details. 
Mortgage is on interest only with a life of mortgage rate of .5% above base - currently costing about £30 monthly.  Current amount borrowed is £125,000.
We are already paying down the mortgage monthly and expect to have it fully paid in 4 years. 
We are not living in the property as we are currently not living in the UK and it generates £18,000 income per year.  At the moment all of that income is being ploughed back into the mortgage, plus an additional £2k per month.   
We are likely to be returning to the UK in a few years and will want to sell the property with the mortgage and use the funds towards a new home. 
As I am a US/UK dual national and have already taken total small cash sum at 55 that I had in a UK pension (all liable to US income tax unfortunately)  I don't want to invest it in a UK pension or other UK tax friendly vehicle since these are not US tax friendly.   But in general without getting into specific recommendations - does it make sense to pay off the mortgage or invest/save the money elsewhere?  Is there a simple cost/benefit equation I can work out?  
Any suggestions gratefully received. 
Thanks, 
ellesters

ellesters01

Sorry, just to add.  I have an emergency fund already and there is no early repayment penalty to consider.  

Socajam

I wold put some into Premium Bonds and some in Direct Saver and the rest on the mortgage.
Both are tax free to the UK not sure if you were to win big on the PBs, how that would affect your US taxes.

ColdIron

NS&I Direct Saver is taxable

DiggerUK

Clear debts and mortgage.
UK gold legal tender has no tax implications, and no 'footprint'.

That's about all I gotta say on that..._

Sailtheworld

There is a formula. Mortgage = 0.6%. Long term market returns  = inflation + 4%.
Different risks & different returns with no guarantees.
Why do you have to choose between paying off the mortgage or investing? Why not do a bit of both?

BananaRepublic

Even if you pay off the mortgage you will be getting spare money each year. What would you do  with that? 

MaxiRobriguez

Give up your American citizenship and invest in a UK tax efficient product?

ellesters01

Thanks all!  Re: MaxiRobriguez - I have thought of that before.  Would break my Dad's heart though and he's been through enough this year.  Sailtheworld - can elaborate a bit on your formula?  I tried to do the math last night and it seemed not worth  putting all the funds in a 2-3 year fixed rate savings account at 1.6%.  Don't want to take a risk with the large capital amount but will definitely be looking to invest the income from the flat in something with potential for greater return and over longer term. 

I will be taking some advice about best investments for UK/US dual nationals from a specialist as its complicated. 

MaxiRobriguez

Speaking to a specialist is a good next step, as it's not just pension vehicles that come with tax implications but backdated UK earnings and capital gains on property sales as well for example. Bit of a minefield...