This happens more often than you think. I know someone who was in the same situation but decided not to do anything about it because you need to get a solicitor/lawyer involved and there's a cost associated with it.
Some people are cheeky and if they think they can get away with things, they will. Hence you need to always keep an eye on your land (regularly visit properties/land you have) to prevent such things from happening.
If the neighbour has crossed his boundaries, then it is illegal and you can sue him for that. You have a few options:
- Get him to alter his property so that it doesn't come on your land
- Sell him the piece of land where he has trespassed
- Accept the fact you've lost a bit of your land
Option 1 and 2 requires you to get a solicitor involved but you can claim back the costs and make the neighbour pay for it because he is at fault. You need to have the money upfront though and a good lawyer will be able to get your money back as well as compensation for the trouble.
It is very unlikely the neighbour will accept Option 1 as it requires him to demolish and build again but that is not your problem, it is his.
Hope that helps.