The 34-year-old will go up against the Welshman on Wednesday when Everton play Tottenham at White Hart Lane.
“Gareth is maturing into an outstanding left-winger, probably the best in the Premier League if not in Europe,” Neville told reporters.
“We are going to have to be at our best to stop him.
“I see a better player than the one from last season. He is adding things to his game every year.
"When I was young, each year I was told, ‘You have got to add something new to your game, you have got to try to improve five or 10 per cent.'
“I see him doing things now that he wasn’t doing 12 months ago. Teams have tried to block him on the flanks, but he has started coming into the middle.
"He has scored a lot of goals and that is something he has added."
For many years Everton were considered to pose the biggest threat of breaking into the illusive Champions League places.
They did so in the season of 2004/05 but have since failed to repeat the feat, with Spurs overtaking them as not only Champions League contenders but also title challengers.
Neville believes Spurs have the quality and the determination to threaten the top two.
He continued: “I think Spurs are genuine contenders. The outstanding two are [Manchester[ City and United, but the result that has impressed me most about Tottenham was the 1-0 against West Brom. That showed a real determination.
“That is what you have got to do to win championships. You can't always win by three or four and play free-flowing football.
"Maybe with the additions they have got, they have got the doggedness that they may not always have had. Wednesday will be a real test for both teams, coming out of the Christmas period.”
Neville’s manager David Moyes is also full of admiration for Tottenham and in particular the job Harry Redknapp has done at White Hart Lane.
“What Harry has done is to give his side a bit of a British identity, but to combine that with the fluency of some of his foreign signings," oyes said.
“We were up there with Spurs, challenging to break into the top four. But they have kicked on because they’ve spent a lot of money, and Harry has done that wisely.
"When he took over they were in a bad position, despite the money they spent, but he has given them a real style.”