TimeMachine estimated size of full backup

I have a test partition on a 500GB HDD running High Sierra and I thought it would be a good idea to have a backup. The HDD has 340GB free space and as such only 160GB is used. And I have a small 300GB HDD that I would use, but TimeMachine tells me "not enough capacity" and I can see that it calculates the size for a full backup of the 160GB to be 809GB!!!!

My Mac has a 1TB HDD and is using 648GB and here Time Machine calculates the size for a full backup to be - yes you're right - 648GB.

So what am I missing? Can anyone explain this?