Adoption of the Hijri calendar
During the caliphate of ʿUmar ibn al-Khattab (may Allah be pleased with him), the Companions gathered to agree on a unified dating system for the Islamic state. They settled on making the Prophet's ﷺ migration (the Hijra) the epoch of the calendar, and made Muharram the first month of the year.
As the Islamic state expanded under ʿUmar ibn al-Khattab (may Allah be pleased with him) and correspondence between the provinces multiplied, letters reached him bearing no date. So he assembled the senior Companions to consult them on establishing an era by which deeds and covenants could be fixed.
Suggestions varied: some proposed dating from the Prophet's ﷺ birth, others from the start of his mission. ʿAli ibn Abi Talib (may Allah be pleased with him) proposed dating from the Hijra, for it had separated truth from falsehood and established the Muslims' state — so ʿUmar adopted his view.
They agreed that Muharram would open the year, as it is when people return from their Hajj. From that time the Hijri calendar became the calendar of the Ummah, by which it fixes its acts of worship and its occasions to this day.
Note — differing reports on the date: It is well known that this was in 17 AH, though 16 AH is also reported. It is placed here at the start of Muharram, since that is the first month of the year adopted as the epoch.