In general, as long as you are you're on your own property, or in a public place, you can photograph (with both still and moving images) who and what you like. (It's the position of the camera that's relevant, not the position of the subject. It's perfectly lawful, for example, to take a photograph of someone in their garden, if you're standing on a public footpath).
The Data Protection Act requires the operators of some CCTV systems to register with the Office of the Information Commissioner, and to comply with the terms of that registration. Up until recently, the Information Commissioner might have taken the view that your neighbour was required to register under the Act. However, a recent court decision has forced the Information Commissioner to change his guidance because it is now clear that both private individuals and businesses can install basic camera systems (without registering under the Act), for the purposes of enhancing the security of their premises and property, as long as the images are not passed to anyone other than the police:
http://www.ico.gov.uk/for_organisations/topic_ specific_guides/cctv.aspx
(i.e. the basic right to photograph anyone and anything, from your own property, has been upheld).
Chris