It is not against the law to have a camera covering your property and that of your neighbour. It is also fine for cameras to cover pavements and roads etc. If your neighbour makes a subject access request you must provide them with any footage where they are identifiable according to GDPR.
You can often block out areas on the camera when you view it on an app, so even if the lens means it can see your garden, they can have that area blacked out so nothing is recorded in that zone. I would approach them and ask if they are able to do this, and say you would prefer it not to cover your property.
One of my neighbours has CCTV, they have a van with tools in and it’s to prevent the theft of that. They asked us when we moved in if we minded it covering us and we said no. We don’t sit out the front and often just do gardening, but we know them well and get on too so it’s not something that worries us.
It has come in useful a few times! Caught another neighbour cutting down our tree(!) and a car crash outside our house.