Use 'bottle it' in casual or informal situations, not in formal writing or speeches. I nearly went skydiving with my mates, but I bottled it.
Pro Tip 2/3
UK Specific
Remember it's mostly used in the UK, so it might not be understood by English speakers from other regions. He was going to run the marathon, but he bottled it.
Pro Tip 3/3
Negative Connotation
'Bottle it' often implies criticism or disappointment in someone's lack of courage. You're not going to bottle it this time, are you?