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My issue was from making the update from Ubuntu 12.04 to 14.04 was that my apache2.conf was not correct configured:
In terminal type:
sudo gedit /etc/apache2/apache2.conf
Find:
<Directory /var/www/>
And make sure the AllowOverride directive is set to All.
After I made that change I could use custom permalink structures in Wordpess again, hope this helps anyone as it did me!