Character in Dad's Army allowed to make yeast cake (7)
I believe the answer is:
pikelet
'yeast cake' is the definition.
(pikelet is a type of cake)
'character in dad's army allowed to' is the wordplay.
'character in dad's army' becomes 'Pike' (Pike is a character in the sitcom Dad's Army).
'allowed to' becomes 'let' (to let something happen is to allow it).
'pike'+'let'='PIKELET'
'make' acts as a link.
(Other definitions for pikelet that I've seen before include "local crumpet" , "Thin kind of crumpet" , "15 [TEACAKE]" , "afternoon treat, perhaps" , "Type of crumpet" .)