You can create a top-level folder, or you can navigate to the folder where you can create a subfolder.
Whether starting from the top level of all folders or within a folder, tap the menu icon () at the top. If at the top level, you see the choices on the left. If within a folder, you see the choices on the right.
To create a top-level folder, make sure that you are seeing the menu on the left. Otherwise, make sure you are within the folder where you wish to add a new folder. In either case, tap Create Folder. When prompted, enter the folder name and tap Create.