Accounts being filed at Companies House will show the privately owned firm reporting a 10% rise in income from £6.3 million to £6.98m.
Pre-tax profits in the 12 months to the end of March this year more than doubled from £859,000 to £1.9m. Employee numbers remained static at 65.
The company – which operates a vehicle-carrying service between Hunters Quay near Dunoon and McInroy's Point near Gourock, Inverclyde – had reported an after-tax loss of £2.3m in its 2011 accounts after a backdated tax bill of £3.1m.
The long-running tax dispute, dating back to 2004, centred on whether Western Ferries should be allowed to pay a tonnage tax in lieu of the significantly more costly corporation tax.
The settlement in favour of Her Majesty's Revenue and Customs in 2011 meant Western Ferries had to come up with a lump sum payment covering corporation tax across several years.
However, with just a normal tax bill to foot, the accounts for the financial year to the end of March 2012 will show an after-tax profit of around £1.6m.
The withdrawal of a rival vehicle service in July 2011 helped Western Ferries, which already had more than 90% of traffic on the route, to record a 3.4% rise in passenger numbers in the most recent period.
Managing director Gordon Ross said: "Had it not been for this additional [passenger] traffic, the belief was that carryings would have fallen in comparison with last year. However, the most significant change from last year was that there were no legal or interest costs associated with our application for tonnage tax eligibility and our 2012 tax bill represented just the one year's corporation tax charge as opposed to the eight years that were paid in 2011."
Mr Ross said ticket price increases had been matched to inflation rates although the business was dealing with continuing high fuel prices.
The company celebrates its 40th year of operations between Gourock and Dunoon in 2013 and it expects to have two new £4m ferries, being built at the Cammell Laird yard in Birkenhead, in operation towards the end of August.
Each will carry 40 cars and 220 passengers and will allow the firm to carry out more journeys at peak times.
Two older vessels will be retired although the ones delivered in 2001 and 2003 will remain in operation.
Mr Ross said: "These new vessels represent a significant investment in the company's, its employees, and our customers' future.
"In comparison to the vessels they will replace, these new vessels are larger, faster, more fuel efficient and will provide improved facilities for our passengers.
"The additional speed will enable the company to deliver up to 12 sailings an hour during extreme peak periods, thereby increasing overall capacity by almost 30%.
"Construction is on schedule and both vessels are expected to be in service by the end of summer 2013."
Mr Ross said the business ended the financial period with a net cash position.
He added: "Performance from the year-end has been in line with expectations, but we are waiting for the economy to turn round."