They went to all the hassle of lawyering up to contest a £1000 fine?
In this case that's the biggest fine the ICO can offer for late notification. However, as a general rule, the fines (or "monetary penalties") that UK regulators impose are decided by a range of factors, including a particular consideration of the track record of offenders. If TT can get out of the £1k fine, it will have a bearing on future penalties for next time they screw up. With the ICO only handing out a theoretical maximum £500k fine for major breaches that still doesn't matter. But under the EU GDPR fines could be very serious from May 2018, and that's probably what is being played for here.
The Remainderers will weep and gnash their teeth and say that Brexit means we won't have any protection under GDPR because it probably won't be enforced during the leaving period. In strict terms that's not proven, but even if that is the case I would suggest that the UK government will not wish to have the weakest data protection regime in the developed world (and a system that prevents data transfer from the EU), so a UK act of similar standards is a near certainty.
So for TalkTalk, appealing the penalty makes economic sense, since even the smallest chance of success is worth hoping for.