It is only related to your local storage. iCloud is different notification.
Also, unless you have a plan like 200GB or so, 3.5GB remaining should not be enough to trigger that notification.
No it seems to be referring to my cloud storage, even takes me to a “tip” about to turn in my photos backup off ( which it already is ) I also know it’s not talking about my local storage because I have over 10 gigs left