I have resolved this issue. Turns out the internal server error was caused by my accidentally uploading the local dev copy of the .htaccess file.
This was causing the internal server error due to an incorrectly specified RewriteBase variable.
Solution was to delete the .htaccess file on the live server and then go into wordpress settings > permalinks and then pressing save. This generates a new correct .htaccess file on the live server. This fixed the problem.