Preheat your oven to 350°F (175°C). Grease and flour a cake pan.
In a mixing bowl, cream together the butter and sugar until light and fluffy.
Add the eggs one at a time, beating well after each addition. Stir in the vanilla extract.
Combine the flour and baking powder, add to the creamed mixture and mix well. Finally, stir in the milk until the batter is smooth.
Pour batter into the prepared pan. Bake for 30 to 40 minutes in the preheated oven. Cake is done when it springs back to the touch.
For the caramel frosting, melt the butter in a saucepan over medium heat. Stir in the brown sugar and milk. Bring to a boil, then remove from heat. Let cool slightly, then beat in the powdered sugar until smooth.