In a mixing bowl, use a hand-held mixer to beat together the butter and sugar until well combined - about 4 minutes.
Add in the egg and milk. Beat to combine.
Next, add the flour, baking powder, and salt. Beat into the butter and sugar mixture.
The dough will be dry and crumbly at first, but keep beating until a dry dough is formed. In some cases, you might need to add one more tablespoon of milk. Knead dough to form a ball. Cover with plastic wrap and refrigerate for 2 hours.
When ready to bake, preheat oven to 350°F. Prepare a baking sheet by lining it with parchment paper or a silicone baking mat. Set aside.
Cut dough into 4 portions. Working with one portion at a time, roll dough to 1/4 inch thick between two sheets of parchment paper.
Use your larger cookie cutter to cut the exterior shape of the cookie. Use your smaller cookie cutter to cut out the center. Use a metal spatula to transfer the cookie to prepared baking sheet. Save the leftover dough. Re-roll to make more cookies.
Using a straw, push straight down to cut a hanging hole into the cookie.
Fill the center hole with the crushed candy, using the colour of your choice. The candy should be level with the top of the cookie. A little more or less will not make a difference. If you get any candy on the cookie, use a small, clean paintbrush to brush the candy into the center hole.
Top each cookie with a generous sprinkling of sanding sugar.
Bake for 8 minutes. Remove from oven and allow to cool for 5 minutes on baking sheet. Carefully transfer to a wire cooling rack to finish cooling.