Pretty Permalinks and Mod rewrite issues!

I’m having issues when attempting to re-structure the permalinks on my website.

On my site I feed my blog posts through to the home page of the site. I then hold all my wordpress elements within the ‘blog’ directory.

When I set up the permalinks and modify the .htaccess file (in the blog directory), the permalinks work a treat in the blog directory, but the feed on the home page returns:

<strong>Not Found</strong>
Sorry, but you are looking for something that isn't here.

.htaccess file consists of:

# BEGIN WordPress

<IfModule mod_rewrite.c>
RewriteEngine On
RewriteBase /blog/
RewriteRule ^index\.php$ - [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /blog/index.php [L]
</IfModule>

# END WordPress

What am I doing wrong?!

Site address:
https://www.naranjamedia.co.uk/home.php

Blog address:
https://www.naranjamedia.co.uk/blog/