In general, anyone is free to photograph (using both still and moving images) what (and who) they like, as long as they do so from their own property or from public land. (It's perfectly lawful to take a photograph of someone through their window as long as the photographer is, say, on a public footpath).
The Data Protection Act changed things slightly but there's been a test case which has shown that the law is not as restrictive as even the Information Commissioner thought it was. (i.e. the Information Commissioner has had to modify his guidance on how to comply with the law). The position now is that you can install the camera which you propose, without breaking any laws and without registering under the Data Protection Act, as long as the camera is used for general security purposes and the recorded images are not passed to anyone other than the police or the courts.
Read this, and then click on 'Small user checklist' for confirmation that you don't need to register under the DPA:
http://www.ico.gov.uk/for_organisations/topic_ specific_guides/cctv.aspx
Chris