To create subfolders:
Open the Layer manager.
Click the three-dot menu on the folder you would like the create a folder inside.
Select "Create subfolder".
A new folder will be created inside that folder for you to move items into.
You can also move folders into each other by dragging and dropping them to where you want them. Click and drag the folder you want to move, when you are hovered over the folder you want to put it into, release the mouse and the folder, with its contents, will be moved into the new location.