Read this,
https://assets.publishing.service.gov.u ... racter.pdf page 47
Lawful residence
An immigration breach relating to lawful residence includes:
• overstaying
• illegal entry
• absconding
• failing to comply with the requirements of the EEA Regulations 2016, as saved
Prior to 28 June 2022, immigration breaches in the 5-year period before a citizenship
application were normally a reason for refusal of citizenship on the grounds of not
meeting the lawful residence requirement set out in section 4 and section 6 (read
with paragraphs 1 and 2 of Schedule 1) of the British Nationality Act (BNA) 1981. If
the breach was in the 10-year period before a citizenship application, it was normally
grounds for refusal of citizenship on the basis of not meeting the good character
requirement.
Schedule 1 of the Nationality and Borders Act 2022 (NABA 2022) amended the
requirements for naturalisation and registration for British citizenship under sections
4(2), 6(1) and 6(2) of the BNA 1981, so that a person can be treated as meeting the
lawful residence requirement during the qualifying period without further enquiry
where they hold indefinite leave to enter or remain in the UK. This change
commenced on 28 June 2022.
This change does not extend to applications to naturalise as a British overseas
territory citizen.
To align with changes to the qualifying period, immigration breaches relating to
lawful residence may be disregarded when assessing good character during the 10-
year period prior to the application where all of the following factors apply:
• the person is applying for naturalisation as a British citizen, or registration as a
British citizen under s.4(2), 6(1) or 6(2) of the BNA 1981 after 28 June 2022
• that person holds indefinite leave to enter or remain (ILE or ILR, also known as
settlement) in the UK
• no concerns (for example, regarding the person’s character) have arisen since the
grant of settlement which might cast doubt on the decision
Therefore, applications where it remains appropriate to consider immigration
breaches relating to lawful residence, alongside other good character factors, may
include but are not limited to:
• where historic information has come to light which, had it been known at the time
of granting settlement, may have led to refusal
• where something occurred after the grant of settlement to indicate revocation of
that status may be appropriate
• applications to naturalise as a British overseas territory citizen
Immigration breaches that do not relate to lawful residence (for example working in
breach of conditions, hiring illegal workers, or failure to observe reporting
requirements) must still be considered.
See naturalisation as British citizen by discretion (page 51)
Overstaying
Where you are not disregarding immigration breaches relating to lawful residence, if
a person has previously overstayed permission to enter or stay in the UK, it will
normally be appropriate to refuse the application for citizenship, unless it is the sole
adverse factor weighing against the person’s good character; and either:
• the person’s application for leave to remain was made on or after 24 November
2016, and the application did not fall for refusal on the grounds of overstaying
because an exception under paragraph 39E of the Immigration Rules applied
• the period without leave was not the fault of the applicant, for example where it
arose from a Home Office decision to refuse which is subsequently withdrawn or
quashed or which the courts have required the Home Office to reconsider
For information on dealing with breaches of conditions see liability to administrative
removal.
The question is: if this illegal work and overstay had come to light when you applied for ILR, would it have affected the decision? I am not an expert in ILR enough to answer.
All advice comes from personal research and experience and should not be regarded as professional opinion.