Yes i brought it from the Apple refurb site it has 1TB with fusion drive
I would like to know if i can migrate the internal HDD to my new SSD via usb using Migrate Assistant or would it be best to use Time Machine, i would appreciate it if somebody could explain how to do both.
Why did you think it has a 1TB Fusion drive? As I and someone else said, the 2020 27" iMac model only had SSDs, with no fusion drives offered. That is why I suggested you should use the System Information app in the Applications/Utilities filder to check your hardware and post the results here. I.e., what is the internal Hard Drive (HD) (HD does not only mean a Hard Disk Drive, a spinning hard disk, it can also indicate an SSD).
OK as
@NoBoMac said, You have a SSD as the internal drive, There is no need for an external boot up drive. That screenshot shows about 18GB used and 275GB empty, suggesting a bootable partition of about 300GB and over 700GB as another volume, so it must be a 1TB SSD, with 2 partitions or volumes.
It looks like nothing needs to be done, 275 GB free on the boot volume should be enough.
Can you see that other 700GB Volume? Check the finder settings. Do you have show Show Hard Disks selected in the side panel?
As for your question, if you connect an SSD to the USB port, using Disk Utility (make sure to use the View Menu in Disk Utility and select "Show all devices") you should be able to initialize it as APFS, which is designed for SSDs.
Then download Carbon Copy Cloner and install it. You can use it (free for a month, with no restrictions) to make a backup of the internal drive to the new external SSD.
This is the Carbon Copy Cloner (CCC) site.
https://bombich.com/
There is a blog on the CCC site about bootable external drives, I suggest you read it.
While many have used bootable clones, and some suggest doing so, the author of CCC suggests that having a CCC backup is quite sufficient and I agree. It has saved my bacon several times!
Of course you can also use Time Machine, but I canT recommend that, have seen too many cases where it didn't work when needed to restore a system CCC has never failed in my usage.