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Unless you are married to a British citizen, you need to have had ILR for a year before you can apply – if you are married to a British citizen you can apply as soon as you get ILR, as long as you have lived in the UK for three years legally before you got ILR.
To be eligible for naturalisation you need to have spent no more than 450 days outside the UK in the five years before your application (270 days in the past three years, if your spouse is British), and no more than 90 days in the last 12 months.
You must also be of good character. There are a series of sanctions that are imposed for criminal convictions, breaches of immigration law and civil offences which, depending upon the seriousness of the offence, can lead to you being ineligible for either a number of years, or, in some cases, forever.
Any children born after you get ILR are automatically British; children born before that need to be registered as British.
A child who was born in the UK before you got ILR is entitled to be registered as British, whereas children born overseas are registered at the discretion of the Home Office. Children born in the UK who live here for the first 10 years of their lives are also entitled to be registered as British, whatever the visa status of their parents.
All children over the age of 10 are also subject to the good character requirement.