Sift and mix flour and salt in a medium sized bowl and set aside.
Place butter and sugar in a large mixing bowl of a stand mixer fitted with the paddle attachment. Mix on medium speed until mixture is pale and fluffy. Use a spatula to scrape any ingredients from the side of the bowl.
Add egg yolk and vanilla extract and mix for 1-2 minutes.
Add dry ingredients and mix until cookie dough is formed.
Divide cookie dough into 12 parts. Rolls each cookie dough into a ball. Transfer to a plate with parchment paper and chill dough for at least 30 minutes (up to overnight).
Preheat oven to 175°C (350F) and line a large baking sheet with parchment paper.
Place each cookie ball on the baking sheet, leaving a 2-inch space between each one. Use your thumb or the round back of a measuring spoon to make an indentation in the center of each cookie ball.
Bake for 11-14 minutes or until the edges start to turn golden brown. Cookies will be very soft when out of the oven.
Allow to cool for a few minutes on the baking sheet, then transfer to a wire rack to cool completely.
To make the royal icing: Place powdered sugar and meringue powder in a medium sized bowl. Stir in 2 tbsp. of room temperature water and mix for 1-2 minutes (you can use a handheld mixer or a stand mixer with the whisk attachment for this step).
Spoon icing into each thumbprint cookie, filling all the way to the top. Leave to set for 3-4 minutes, then top with your favourite sprinkles. Leave cookies to set for 20-30 minutes before serving.