Details I remember – story is about a boy who goes into the woods and notices an abandoned cottage is now occupied. He meets a mischievous girl and they form a friendship, then finds out she’s a witch. At some point I believe she makes the mayor of his town dance around, and they go to a fair where she changes into a cat to accompany him undetected. At the ends she starts to lose her powers because she starts to care for him (so her nose grows warm, it had always been icy cold), so she leaves. The very end is the boy all grown up, now the mayor of his town, and he often looks to the forest hoping to see puffs of smoke from the little cottage.
The book had a lots of line drawings similar to Roald Dahl’s but smaller.