Preheat oven to 350°F (175°C). Line a muffin tin with cupcake liners.
Toss diced peaches with 1 tablespoon flour and set aside.
In a large bowl, cream together softened butter and honey until light and fluffy (3-4 minutes).
Add eggs one at a time, mixing just until combined after each.
In a separate bowl, whisk flour, baking powder, and salt.
Add dry ingredients to the wet mixture slowly on low speed, mixing just until combined — batter should be slightly lumpy.
Gently fold in flour-dusted peaches with a rubber spatula. Reserve a few peach pieces for topping.
Spoon batter evenly into cupcake liners, pressing reserved peach pieces on top.
Bake for 16-18 minutes or until a toothpick inserted comes out with a few moist crumbs. Let cool completely before frosting.
For frosting, beat softened cream cheese until smooth. Add softened butter and mix until creamy.
Gradually add powdered sugar. Mix honey with 1 tbsp powdered sugar before adding to stabilize frosting. Add vanilla if desired.
Frost cooled cupcakes and serve.