Take your piss, I mean take your pick.
Origin"Take the piss" may be a reference to a related (and dated) idiomatic expression, piss-proud. This is a vulgar pun referring to the morning erections men frequently experience, which have long been popularly attributed to arising from a full bladder, and thus could be considered a "false" erection. In a metaphoric sense, then, someone who is "piss-proud" would suffer from false pride, and taking the piss out of them refers to deflating this false pride, through disparagement or mockery. As knowledge of the expression's metaphoric origin became lost on users, "taking the piss out of" came to be synonymous with disparagement or mockery itself, with less regard to the pride of the subject.
"Take the mickey" may be an abbreviated form of the Cockney rhyming slang "take the mickey bliss", a euphemism for "take the piss." It has also been suggested that "Mickey" is a contraction of "micturate" (urine), in which case "take the micturate" would be a synonymous euphemism for "take the piss." The phrase has been noted since the 1930s.
Alternative theories of origin
One theory is that during the age of the canals in Britain, urine would be brought up the canals to the wool mills in Northern England (particularly to Yorkshire), as urine was used in the process of fixing dye to wool. This was particularly the case for the dyeing items blue with indigo or more traditionally with woad, before synthetic dyes were invented or made commercially available. Being in the business of transporting urine was much less lucrative than transporting wine, so when the boatmen were questioned what they were carrying they would lie and say "I'm taking wine" and the response would be "No you're taking the piss" to express disbelief.
Another theory is that, when tanners had huge pots outside where they worked, the public would be encouraged to urinate into these pots as tanners used the urine to help with tanning and then the saying of "taking the piss" came into use.