The first question that comes to my mind is: Do you really need to quit? Having an income while you moonlight is a huge advantage, as you can survive until your start-up is sustainable (and then quit your day job)
Second: Do you have enough savings to survive a year on your own? If not, keep your current job, build your savings and then quit.
Third: Are you in good terms with your immediate manager? If yes, then do tell him/her -- You might be able to even negotiate an alternative deal, like part-time, contracting or something else. If not, then tell him/her only if asked. In any case, it's certainly better to learn the news through you than through someone else.
Obviously, what I wrote in this post does not apply if you and your employer have a conflict of interests. If that's the case, I'd talk to a lawyer.
For more on this topic - I wrote a post on how to break up with a girlfriend (or employer) that addresses how to not burn your bridges at:
http://blog.nanobeepers.com/2007/04/05/breaking-up-is-hard-to-do/
Be polite, be friendly, but be very quiet about your plans.
People can get petty and weird when they're jealous or angry.
1.cannot work on ur idea, during work time 2.u cannot start an idea that is a direct competitor to ur companies business
if these two do not apply u shud be ok, but the laws are harsher here in the uk. with non compete clauses etc
