Assuming it's formatted as HFS+, then you don't need to do anything. Time Machine will use up the available space, and won't delete existing files.

Time Machine can only work on a volume formatted as HFS+. So you will need to repartition this drive. A quick Google shows that it is possible to resize an NTFS partition, but this can't be done with Disk Utility on MacOS.

I wouldn't recommend playing with the partitioning on the volume if the 500Gb of stuff isn't also backed up somewhere else.