Preheat oven to 170 C / Gas 3. Butter a 25cm tube cake tin and coat with caster sugar.
In a large bowl, cream together the butter and sugar until light and fluffy. Add the eggs one at a time, beating well with each addition, then stir in the vanilla. Reserve 2 tablespoons of flour for later and sift together the remaining flour, baking powder and salt.
Gradually stir flour mixture into the creamed mixture. Use the 2 tablespoons reserved flour to coat the chopped peaches, then fold the floured peaches into the mixture. Spread evenly into the prepared tin.
Bake for 60 to 70 minutes in the preheated oven, or until a skewer inserted into the cake comes out clean. Allow cake to cool in the tin for 10 minutes, before inverting onto a wire rack to cool completely.