Investigations of the contribution of food costs to socioeconomic inequalities in diet quality may have been limited by the use of estimated (vs. actual) food expenditures, not accounting for where individuals shop, and possible reverse mediation between food expenditures and healthiness of food choices. This study aimed to explore the extent to which food expenditure mediates socioeconomic inequalities in the healthiness of household food choices. Observational panel data on take-home food and beverage purchases, including expenditure, throughout 2010 were obtained for 24,879 UK households stratified by occupational social class. Purchases of (1) fruit and vegetables and (2) less-healthy foods/beverages indicated healthiness of choices. Supermarket choice was determined by whether households ever visited market-defined high-price and/or low-price supermarkets. Results showed that higher occupational social class was significantly associated with greater food expenditure, which was in turn associated with healthier purchasing. In mediation analyses, 63% of the socioeconomic differences in choices of less-healthy foods/beverages were mediated by expenditure, and 36% for fruit and vegetables, but these figures were reduced to 53% and 31% respectively when controlling for supermarket choice. However, reverse mediation analyses were also significant, suggesting that 10% of socioeconomic inequalities in expenditure were mediated by healthiness of choices. Findings suggest that lower food expenditure is likely to be a key contributor to less-healthy food choices among lower socioeconomic groups. However, the potential influence of cost may have been overestimated previously if studies did not account for supermarket choice or explore possible reverse mediation between expenditure and healthiness of choices.