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By law, Scottish and Irish whiskies have to be bottled at at least 40% ABV. The ABV of the spirit in the barrel is typically upwards of 53%, and therefore the distillery will add pure distilled water to the cask spirit to bring the ABV down to it's bottling stength. The decision as to what the bottling ABV is principally driven by economics:
a distillery can get c.30%-50% more bottles from a single cask when bottled at 40% ABV compared with cask strength; and
in the UK, spirits are taxed based on the amount of alcohol in the bottle (currently rates are £31.64 per litre of pure alcohol), so a cask strength can attract around £5 more in duty and VAT compared with a whisky bottled at 40% ABV.
The samples below are the same case strength whisky which I have diluted to bring the alcohol level down.
40% ABV
Whiskies bottled at 40% ABV less burn from the alcohol, but also have more muted flavours. As a consequence, the whiskies tend to be 'crowd pleasers'.
Further reading:
https://scotchwhisky.com/magazine/ask-the-professor/12295/why-is-scotch-whisky-bottled-at-40-abv/
45% ABV
Premium whiskies are typically bottled at 43%-46% ABV. In this range the whisky can have more deeper flavour with being overpowered by the burn of the alcohol.
Cask strength (60.4% ABV)
The alcohol burn is most prominent in cask strength whisky, but also carries deeper flavours of the matured spirit.
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