For the cake:
Preheat the oven to 170°C (325°F) Gas 3.
Put the flour, sugar, baking powder, salt and butter in a freestanding electric mixer with a paddle attachment (or use a handheld electric whisk) and beat on slow speed until you get a sandy consistency and everything is combined. Gradually pour in half the milk and beat until the milk is just incorporated.
Whisk the egg, vanilla extract and remaining milk together in a separate bowl for a few seconds, then pour into the flour mixture and continue beating until just incorporated (scrape any unmixed ingredients from the side of the bowl with a rubber spatula). Continue mixing for a couple more minutes until the mixture is smooth. Do not overmix.
Spoon the mixture into the paper cases until two-thirds full and bake in the preheated oven for 20–25 minutes, or until light golden and the sponge bounces back when touched.
A skewer inserted in the centre should come out clean. Leave the cupcakes to cool slightly in the tray before turning out onto a wire cooling rack to cool completely.
When the cupcakes are cold, spoon the vanilla frosting on top and decorate with hundreds and thousands.
For the vanilla frosting:
Beat the icing sugar and butter together in a freestanding electric mixer with a paddle attachment (or use a handheld electric whisk) on medium-slow speed until the mixture comes together and is well mixed.
Turn the mixer down to slow speed. Combine the milk and vanilla extract in a separate bowl, then add to the butter mixture a couple of tablespoons at a time. Once all the milk has been incorporated, turn the mixer up to high speed.
Continue beating until the frosting is light and fluffy, at least 5 minutes. The longer the frosting is beaten, the fluffier and lighter it becomes.