Line a large loaf tin with baking paper and preheat your oven to 170 degrees celsius (fan-forced).
In the bowl of an electric mixer, add the butter, vanilla extract, caster sugar, eggs, flour, baking powder, bicarbonate of soda, milk and lemon rind.
Mix on a low speed until all the ingredients have combined and then increase to a medium/high speed and mix until the mixture is smooth.
Pour the mixture into your prepared cake tin and place in the oven to bake for 40 - 45 minutes or until the cake is cooked through when tested with a skewer.
Carefully remove the cake from the oven and let it cool in the tin for 10 minutes before carefully transferring to a wire rack to cool completely.
Once cool, prepare the lemon icing by sifting the icing sugar into a bowl and adding 2 tablespoons of lemon juice. Mix the ingredient together until they are smooth. Add water until desired consistency is acheived.
Use a spatula or a butter knife to then spread the icing over the cake.